EV Tax Credit & Withholding

[RicardoCabeza]

I'm confused about my scenario:

Total tax due: $10,000

Taxes withheld: $8,000

Remaining tax due: $2,000

I bought an EV this year that's eligible for a credit of $7,500.

So will the $7,500 subtract form the total $10,000 for a refund of $5,500?

Or will it just zero out the remaining $2,000 I owe?

[VolvoGirl · Accepted solution]

Yes It will reduce the total tax due and increase a refund.

It's not whether you get a refund or tax due.   And the withholding doesn't matter.  It's if you have a tax liability on your income.  Look at your 1040 line 22 for total tax. So as long as Line 22 is more than $7500 (before applying the credit), you can use the whole credit.  It will reduce your income tax (but only to zero).  If your non-refundable credits reduce your tax to 0 you will get back all the withholding and payments and any Refundable Credits. Unless you owe for something else like self employment tax or the 10% Early Withdrawal Penalty on IRA withdrawals.

[Bipin1948]

Great response. I have also purchased TESLA.  On Tubotax Home and Business software, how and where do I add the EV credit information?

[MayaD]

Use Form 8936 to figure your credit for qualified plug-in electric drive motor vehicles.

To claim the credit:

1. Open your return.
2. In the search box type Form 8936
3. Select Jump to Form 8936.

Vehicle must be placed in service in 2023 and must be used primarily in the United States. New and previously owned vehicles have income limitations depending on your filing status. New and commercial vehicles must have final assembly in North America.

The credit is nonrefundable, so you can't get back more on the credit than you owe in taxes. You can't apply any excess credit to future tax years.

Credits for new clean vehicles purchased in 2023 or after

Also, beginning January 1, 2023, if you buy a qualified used electric vehicle (EV) or fuel cell vehicle (FCV) from a licensed dealer for $25,000 or less, you may be eligible for a used clean vehicle tax credit 

Used Clean Vehicle Credit