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?

[VolvoGirl]

No it's totally wrong.  If you still have a 6,000 total tax on line 24 then you SUBTRACT the 3,000 withholding payment and you will still OWE another 3,000.   Which should be on line 37.  But line 16 might be wrong too.  Are you saying the tax on your income will also be exactly 7,500?  

Oh, and it took me awhile but your line 22 is wrong.  It should 0 zero.  You subtracted the wrong way.  You are suppose to subtract the 13,500 from 7,500 which gives you a minus 6,000.  (6,000) is less than zero.   Then since your total tax line 24 is zero you will just get back all your 3,000 withholding.  

You did 13,500 - 7,500 = 6,000

Should be 7,500 - 13,500 = (6,000)  which is less than 0.  So line 22 is 0.  

[VolvoGirl]

Ok I made you a sheet using your amounts based on your 2022 return.  Your tax on line 16 is around 5,300.  Why did you put down 7,500?   Did you have any other credits on lines 27-31?  Like the EIC on line 27?  If you reduce your total tax on line 24 to 0 then you just get back all your withholding plus any other credits on 27-31.  

[VolvoGirl]

Now if you want to take advantage of the full 7,500 credit you can increase your taxable income (like convert a traditional IRA to a ROTH IRA or sell some stocks with a gain).  That will increase the tax on line 16 but even though it won't increase your refund you won't pay tax on the extra income.  Then you won't be paying tax on that income in the future.   If this confuses you just ignore it.

Basically you can only reduce the TAX on line 16 & 18 to ZERO.  Then you just get back all your withholding, not any more.

[RyanCangco]

Thank you, indeed my tax liability is at 5.3k not 7.5k.

Ok so please bear with me...The instruction stated subtract line 21 from line 18 which does not give a negative number.

I spoke with someone in the IRS and told me that I am supposed to subtract the 7.5ev credit first, so even if my tax liability 16 is 5.3k, it will still amount to zero as there are no negatives.  

The 1040 instruction to combine the 7.5 ev plus the child tax credit and subtract to the tax liability will get $8.2k (which is 2.2k more than 6k, so using the 7.5k first makes sense)

From what I understand, the child credit is refundable, and that 6k should still be intact, unless I am unable to subtract it because the tax liability is now zero. 

Ok so if the child credit is intact and with the tax liability is gone, I also get the full tax withholding of 3k for a refund of 9k.

I also got the calculations (minus subtract the 7.5k first) from ROB CPA on YouTube (he did the same 1040 operation)

I know for this tax year I should approximately get $4500 in refund so it doesn't make sense that I buy a car and it has a negative effect on it.   I messed around with my TurboTax and entered some EV cars and it did give the return a boost (but it's based off old calculations and rates)

Thank you for this, i apologize for not grasping the earlier concepts that you were trying to convey. 

[VolvoGirl]

The instruction stated subtract line 21 from line 18 which does not give a negative number.  

Sorry but it does give a negative number.   

Using  your numbers

Line 18       7,500

- Line 21  -13,500

Equals        -6,000

A -6,000 is negative and less than zero.

I spoke with someone in the IRS and told me that I am supposed to subtract the 7.5ev credit first, so even if my tax liability 16 is 5k, it will still amount to zero.  

RIGHT, EXACTLY.   As we've been saying the credit will only reduce your tax to zero.  Then you get back all your withholding and any refundable credits.  The Child Tax Credit is not refundable but any Additional Child Tax Credit line 28 is refundable.  I'm not sure how the Additional Child  Credit works.  @xmasbaby0 

[RyanCangco]

Ok thanks.  I ran some numbers on Turbo tax 2022 and on form 8936, I entered a tesla model 3 and it showed a 7500 credit.  It had a positive effect on my tax refund with the child credits and my witholding.  Is this something that I can go by?  Are there any new rules that would render this inaccurate?