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?

[EV guy]

Sorry to revive an old thread, trying to verify whether I can fully utilize the $7,500 EV tax credit, married with 1 child, filing jointly, AGI is around $80k.  Not sure it matters, but only withheld around $8700 in Federal tax for the year. 
Thanks! 

[Texconsin]

Your AGI has an impact, of course, but how much you had withheld has nothing to do with it.  It has to do with your tax liability after you take your AGI and reduce it by standard or itemized deductions (and qualified business income deduction, if applicable) to arrive at your tax liability and then reduce that by other tax credits you may have that must be first applied before a net liability - the extent to which you may use your hybrid credit.  If you have a net liability of $10,000 before your hybrid credit, you will owe $2,500 and you will be refunded $6,200 ($8,700 less $2,500).  If you have a net liability of $6,000 before your hybrid credit, you will be refunded only your withholding of $8,700, as you may use only $6,000 of your hybrid credit to bring the taxes you owe to $0.  They hybrid credit, unlike the "refundable" child care tax credit, is "nonrefundable."  It may be used only to the extent of taxes you owe and can be used to that extent only in the year it is generated.  There is no carry-back or carry-forward.

[IA11]

My tax will be $ 11,408 for 2020 taxable income. I will receive $ 6000 child tax credit for three children under 17 and $ 7500 for electric vehicle.  Which credit will be used first to reduce my tax liability. I think if electric vehicle credit is used first; I should receive $ 2092 in refund. 

[Anonymous]

My question is: How is the tax credit applied when filing married filing separately? All funds for the vehicle were withdrawn from the filing parties accounts which are not jointly held.

[Oo122]

So if I don’t owe anything after my taxes and the government gives me $1000 back for overpayment of federal taxes, would I still be eligible to get the ev tax credit? If so, how much would I get back?

[Texconsin]

It has nothing to do with your net refund or net balance due.  It has to do with your tax liability before taking into account what you may or may not have had withheld, paid as quarterly installments or applied from the previous year's overpayment.  Other tax credits that reduce that liability, however, may impact your ability to use some or all of EV/Hybrid tax credit.  I've used the $7,500 twice, but never had other credits, so I can't be more specific as to WHICH one(s) may have an impact.

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[CristinaTLewis]

I'm getting conflicting answers in researching this. Can you please provide a link to IRS documentation that clarifies this? For example, this website (https://evadoption.com/proposed-changes-to-federal-ev-tax-credit-part-5-making-the-credit-refundable...) claims if we are due a refund (which could occur after paying estimated taxes) you will not get the credit.  However, I ran a simulation in Turbotax 2021 and the software DID add on the credit, even though I was already due a federal refund.  Is it the case that you WILL get the refund if your tax liability is sufficiently high (whether you paid ES or not), as you suggest? And only if your total tax liability  is  LESS THAN $7500 (independent of whether you owe or are due a refund) will you not get a refund if you over paid your ES? I guess I am unfamiliar with how the term "tax liability" is being used: is it the tax on the income, or the tax that is owed (which is dependent on estimated taxes and other refunds)? 

[Vanessa A]

Your tax liability starts with the number on line 16 or the tax on your income.  It is then increased or decreased by non refundable credits and other taxes such as self-employment tax.   If this number is NOT $0, then you can use non refundable credits such as the EV credit.  If this number is $0, you would not be able to take the credit.

The easiest way to explain this although not a thorough explanation is, if line 16 would be $14,000, but you had $15,000 withheld from your pay for taxes and you made estimated tax payments of $5,000, you would have a refund of $6,000.

  Before any other adjustments you would still have the tax liability of $14,000.  This means you would be able to take the $7,500 credit which would reduce your $14,000 liability to $6,500 on line 24 (assuming no other nonrefundable credits or other types of taxes)

On the other hand, if you only had a tax liability of $4,000 on line 16 and no other taxes, you would only be able to take a credit of $4,000 because your tax liability is only $4,000 and the EV credit is able to reduce your tax liability to $0, but not below $0.  Meaning, you will not get a refund of the remaining $3,500. 

Having a refund does not mean you do not have a tax liability.  

[Texconsin]

Estimated tax payments and withholding have absolutely NO bearing on whether or not you qualify for none, some or all of the electric vehicle credit.  After you deduct your standard deduction or itemized deductions, you have your taxable income.  If the tax on that income, less any credits you must apply first, is more than zero, you will receive that portion of the credit, not to exceed $7,500.  I've taken the full credit twice (once for tax year 2016 and again for tax year 2019), so I can assure you that I am correct.  However, since I had no conflicting credits and I don't know your situation, I suggest you trust TurboTax to calculate your credit correctly.  It even knows that a GM or a Tesla no longer qualifies.  Had I not purchased my Chevy Volt in Q1 2019, TT would have calculated just $3,750 and, if not until Q4 2019, it would have calculated just $1,875.

[VinnieJT]

Someone explain to me why the gov is able to falsely advertise this as a "credit" when effectively it's a deduction, not a credit.

[Texconsin]

HUH?  What in the blue blazes are you talking about?  Am I on Twitter?  That comment is just not worthy of a reply.

[NCperson]

@VinnieJT - it is a credit....

your tax liability is listed on Line 18 or Form 1040

the EV credit is part of Line 20 and subtracted from Line 18 --- that is a credit as it is a dollar for dollar reduction in the tax liability. 

however, Line 22 can not go below zero, so in some cases the credit is limited.  

[VolvoGirl]

There are 2 kinds of credits, Refundable and Non Refundable.  Refundable Credits you can get even if you do not have a tax liability on 1040 line 16.  

The Electric Vehicle credit is a non-refundable credit.  It can only reduce your tax to zero, which means you could get back all your withholding and any refundable credits.

See  What is an electric car tax credit?

[rbatra311]

So with the new rules of nonrefundable credit-- I just want to clarify and apologies in advance if it is a repeat or naive question:

As long as my total tax liability for the year is greater than $7500, I should receive the credit, either as a reduction of my tax due or a refund

Or do I have to owe greater than $7500 in taxes when I File the return, to apply the credit-- if so I can change my withholding elections to get a greater tax bill

Much appreciate your answer

Ram