may not getting full ev credit....what other options?

[jujaku]

Status : MFJ, no kid

Annual salary : approx. $93500 (sole income for us)

IRS tool estimated fed income tax approx. 5300.

Twice a month, I put approx. $230 for Fed income tax withhold and $240 for SS tax withhold. (no state income tax)

And there will be approx. $12000 for 401k

At this rate, it seems like I wouldn't be able to get full ev tax credit, but anyone can confirm?

Some says to work with professional to increase tax liability but how and what's benefit for paying more taxes???

[Mike9241]

the EV credit is non-refundable so you need a tax liability equal to it, (before withholding) to get the full benefit. the usual strategy employed to increase tax liability is to take steps to shift 2022 income into 2021 or to defer expenses from 2021 to 2022 (if you itemize).  

example

2021 taxes   $5,300

ev credit     -   5,300 (limited)

2022 taxes     5,300

total taxes two years $5,300

income/expense shifting  

2021 taxes   $7,500

ev credit    -    7,500

2022 taxes     3,500 (income/expense shifting has lowered 2022 taxes. but because of graduated taxes, you                                           save less than the amount you increased 2021 taxes

total taxes two years $3,500 

so you see the benefit is that you get to use more of the credit which saves you taxes.

[Critter-3]

Increase income ...  options include selling stock at a gain,  taking a taxable 401K/IRA distribution, converting an IRA to a ROTH, etc. 

[Opus 17 · Accepted solution]

You are asking really late, it may be too late to make any changes.

If your income tax owed is expected to be less than $7500, the only way to get the full benefit of the credit is to get more income so you owe more tax.  Because you are $2200 under the max credit, if there was a way to increase your income now by $10,000, it would be tax free, because the tax would be covered by the EV credit.

There are very few things I can think of at this late date that would increase your income for 2021.

1. Delay last-minute holiday charity contributions until 2022, so you pay higher taxes this year (which are covered by the EV credit) and then get the deduction next year.  But it may be too late.

2.  Do a conversion of $10,000 of your 401(k) into a Roth option 401(k) account, if your employer offers a Roth option.  That will create $10,000 of taxable income now (which will be covered by the EV credit) but when you retire, you pay no tax on withdrawals from a Roth account (unlike regular 401k accounts where you pay regular income tax).  It may take several business days for the Roth conversion to clear (if you are even allowed to do it) and if it doesn't clear until 1/3/22, then it doesn't count as 2021 income even though you might have made the request in 2021.

3. Ask your boss to pay any bonus you expect for 2022 before 12/31/21.

4. Sell some investments that have increased in value (stocks, gold, etc.) so you lock in the capital gains in 2021.  If you want to re-buy the same securities, be sure to wait at least 31 days. 

Other than that, I think you just left it too late to make a difference.

Or, if you didn't actually buy the EV yet, put it off until 1/3/22 and then start your tax planning earlier next year.