EV PHEV Tax Credit

[jbird81]

After reading countless articles on this one, I'm still confused due to what's been posted on this website about how the credit is applied.  Based on the articles, it's only useful if you owe money to the government (i.e. if you did not pay enough in taxes throughout the calendar year).  However, according to a few posts in this community and elsewhere, it would seem as though it has more to do with tax liability (line 16 of 1040) than money owed.  In other words you can still benefit from the full tax credit if the tax liability is higher than the credit enough.  So based on my taxes from last year, your tax liability was 12k and after child tax credit, was down to 10k (line 24 of 1040).  If that were the case this year then we would benefit from the full EV/PHEV credit.  It doesn't necessarily matter how much the government owes you or how much you owe the government, but rather how much you paid in taxes throughout the year.  Am I correct in assuming all of this?

If I owed 1k in taxes but had 8k withheld throughout the year, then would I get back 7500 on my tax return with 1k of it applied to money owed?

[Critter-3 · Accepted solution]

2020 tax return line 16 it the tax liability that can negated by the EV credit  however the non refundable portion of the  CTC must be used first ... the CTC is $2000 per child but $1400 is refundable. What you had withheld is immaterial for this credit calculation. 

For instance ... if you had 1 child for the CTC ...

line 16 ... tax liability  $12K - CTC of $600 = $11400 - EV credit $7500 = $3900 tax remaining

withholdings of $8000 + $1400  ACTC = $9400 in payments    - $3900 remaining tax bill = $5500 refund 

NOW for 2021 things are a bit different ... the CTC went up and the entire amount is refundable ... this is ONLY for 2021 unless congress changes their minds again.

Line 16 ... $12000 - EV credit $7500 = $4500 tax remaining 

withholdings of $8000 + $3000  ACTC = $11000 in payments    - $4500 remaining tax bill = $6500 refund