I just realized I will not have enough tax liability to claim my entire $7500 EV tax credit unless I zero out my bi weekly paycheck Fed withholding to zero. I do not want to check the exempt box only want to reduce my current $870 bi-weekly withholding down to as close to $0 as possible. How do I do this on the new W4 form? Currently I claim 10 allowances from the old W4 form I had submitted many years ago. Should I claim more deductions (I have 2 dependents under 17) or should I put a large $ amount in the 4b. Deductions area. What is the best way to remove the $870 current Fed withholding as I only have 6 bi weekly paycheck left to increase my tax liability by around $5K. Appreciate anyone's feedback.
It the tax on line 22 (not 24). The EV credit only reduces the tax liability on 1040 line 22 to zero. Then you will get back all your withholding and any refundable credits. But it doesn't reduce any other taxes on line 23 like self employment tax or a 10% early withdrawal penalty on IRAs.
It's line 22, not line 24. The "other taxes" on line 23 don't count as far as the credit is concerned. And you have to look at line 22 before you enter the EV credit, because the credit will be subtracted from line 22. If line 22 is more than $7,500 before you enter the EV credit, you will get the full credit.
Don't change your withholding. It's not whether you get a refund or a tax due. And the withholding and estimated payments 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'll get the whole credit.
The EV credit only reduces the tax liability on 1040 line 22 to zero. Then you will get back all your withholding and any refundable credits. But it doesn't reduce any other taxes on line 23 like self employment tax.
And if your tax on line 22 is less than 7,500 and 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.
Changing the amount of tax withholding has no effect whatsoever on your tax liability. Your tax liability is based on your total taxable income. Changing the withholding has no effect on your total taxable income.
You do no understand my question. I want to lower my bi weekly withholding to as close to zero as possible as I have already withheld too much through out the year to have any tax liability when I do my taxes for 2023. I have already run the numbers and found I will get a refund and not be able to claim any of my EV tax credit.
You are misunderstanding how it works. But sure go ahead and change your withholding. You will just not get as big a refund.
What the employer withholds from your pay has nothing to do with the credit.
As explained previously, the credit is limited to the amount of tax liability, the amount of tax owed BEFORE any withholding or credits are applied.
changing your withholding does not affect the credit in any way . It’s how much you OWE before your withholding is applied.
Go to this IRS website and run the withholding estimator - https://www.irs.gov/individuals/tax-withholding-estimator
Ok I get it now. So as long as I have a tax liability on line 24 of my form 1040 greater than $7500 I will get the full credit regardless of what I have paid on my withholding throughout the year. Please confirm.
It the tax on line 22 (not 24). The EV credit only reduces the tax liability on 1040 line 22 to zero. Then you will get back all your withholding and any refundable credits. But it doesn't reduce any other taxes on line 23 like self employment tax or a 10% early withdrawal penalty on IRAs.
It's line 22, not line 24. The "other taxes" on line 23 don't count as far as the credit is concerned. And you have to look at line 22 before you enter the EV credit, because the credit will be subtracted from line 22. If line 22 is more than $7,500 before you enter the EV credit, you will get the full credit.
An employee may be subject to a $500 penalty if he or she submits, with no reasonable basis, a Form W-4 that results in less tax being withheld than is required.