If I purchase an electric vehicle with the 7500 tax credit, how do I ensure that I will owe enough at the end of the year to see that full credit when I do my taxes?

[NCperson]

@rbatra311 - the withholdings have nothing to do with eligibility for the credit. 

Please review Form 1040 (the line items for the 2021 version and the 2022 version noted below are the same)

Your tax is calcuated on Line 18

The EV Credit is posted on line 20 

Line 22 is Line 18 minus Line 20, but not less than zero.  So as long as Line 18 is at least $7500, you get the whole credit.

However, do note that there is also an income limitation if you went under contract on your vehicle after the Inflation Reduction Act took affect (late August, 2022).  If you MAGI (LIne 11 of Form 1040 for most everyone)  must be below these numbers for either the current year or the prior year to be eligible for the credit: 

single: $150,000

MFJ: $300,000.

HOH: $225,000

If your MAGI is above these limits in BOTH the current year and the prior year, you are not eligile for the credit. 

[rbatra311]

Thanks. But I thought the MSRP and Income Cap take effect from 1/1/2023. Its the assembly and battery parts that went into effect in August 2022

[rbatra311]

Thanks @NCperson 

But I thought the MSRP and Income Cap take effect from 1/1/2023. Its the assembly and battery parts that went into effect in August 2022-- am I correct?

[NCperson]

@rbatra311 

unless the auto was under contract or purchased as of the date Biden signed the Inflation Reduction Act (mid-august), these are the requirments-----

see page 376 for income requirment - it states  'any taxable year', so it is also effective in 2022.   Your AGI must be below these limits in EITHER 2022 or 2021 

see page 377 for MSRP - there is no reference to effective 1/1/23, therefore it was immediately a requirement as of the date in mid Augist that Biden signed the bill into law 

https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_of_2022.pdf

[Pedro18]

The EV tax credit is non-refundable, meaning if you don't owe at least $7500 at the time of filing, you will lose out on the full benefit.   I usually get money refunded at tax time, so I guess I would not qualify for anything?  Is there a legal way to ensure I owe $7500 at tax time?

[Vanessa A]

It depends.  Just because you get a refund, that does not mean you don't have any more tax liability.  For example, if you pay in $10,000 for your federal taxes every year, and get a refund of $1,000, you would still have a tax liability of $9,000 which would make you fully eligible for the $7,500 EV credit if you qualify.  In this situation, your refund would jump to $8,500 instead of just $1,000.

If you pay in $3,000, have a $0 tax liability and you get $3,000 back, then you will not be eligible for the EV credit. 

The only real way to have a higher tax liability is to have more income or fewer deductions or credits.  If you would not take your other deductions or non refundable credits, it would not help you to get bigger EV refund since you would be just giving up one credit for another credit with the same net refund.

[rbatra311]

thanks so much!!

[Pedro18]

Thank you for clearing that up with specific examples!

[BrittanyS]

The EV Credit has a phase-out period when your income reaches a certain amount.  For married filing joint returns, the income limit is $300,000.  When your income exceeds the limit, your credit starts to be reduced.  

You can review your return forms to see the amount of credit you will be receiving by following these steps:

1. Click Tax Tools from the left side panel
2. Click Tools
3. Click View Tax Summary
4. Click Preview my 1040 from the left side panel

@rjohnston18 

[rjohnston18]

Brittany,

My vehicle qualifies under the old rules.  Ordered in 2020 with a binding contract by August 2022.  The income limits don't apply to me.  

[DaveF1006]

When you say you are just showing the $7500, is this the refund you are receiving or is this appearing somewhere else in your return?

@rjohnston18 

[KrisD15]

To clarify, 

Please look at your 1040 lines 16 through 24 and tell us what you see. 

To View Your 1040 in TurboTax Online
Click TAX TOOLS on the left side-bar
Click TOOLS from the drop-down
Select “View Tax Summary” on the Tools Center screen 
Click on “Preview My 1040” which now appears on the left side-bar
 

[rjohnston18]

Thanks everyone. 

I did not see the big picture.  It was showing the amount of my amended return, and I thought that was the total of both returns.  Everything checks out now.