2023 EV Federal Tax Credit

[vigh06]

Why I am I not receiving the full  2023 federal EV credit of $7.5k despite owing more than $7.5k?  I make under $150k , the gov site said my EV (2023 Tesla Model Y) qualifies  with a December 19th 2023 purchase date. I am aware that it is not a credit and only applies toward taxes owed. However, I owe more than $7.5k in tax and the amount of credit I receive is not $7.5k. I noticed that the EV credit amount does go up if I highly inflate my gross income level. 

[VolvoGirl]

You probably have self employment tax?  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. 

[vigh06]

Thank you kindly!

[vigh06]

What other forms of income, outside of "regular employment", qualify for the full credit?

[VolvoGirl]

Anything that will increase your income and AGI.  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.