EV Tax Credit Can I Qualify

[opriepm1]

I have 4 tax deductions (children) and typically take the standard deduction. With the dependent tax credit and standard deduction I don't think I can qualify for the tax credit. Is there a way to calculate my withholdings to an accuracy to figure out if I can take advantage of the tax credit. 

[marctu]

Thank you for the question.    The IRS has a tool here:  https://www.irs.gov/help/ita/does-my-childdependent-qualify-for-the-child-tax-credit-or-the-credit-f...   

In general there are three main requirements to claim the Child Tax Credit ("CTC"), which are:

1. Income: You need to have more than $2,500 in earnings.
2. Qualifying Child: Children claimed for the CTC must be a “qualifying child”. See below for details.
3. Taxpayer Identification Number: You and your spouse need to have a Social Security number (SSN) or an Individual Taxpayer Identification Number (ITIN).

To be a qualifying child the child must have or be:

• The child  has a Social Security number that is valid for employment in the United States
• Be under age 17 at the end of the year
• Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece or nephew)
• Provide no more than half of their own financial support during the year
• Have lived with you for more than half the year
• Be properly claimed as your dependent on your tax return
• Not file a joint return with their spouse for the tax year or file it only to claim a refund of withheld income tax or estimated tax paid
• Have been a U.S. citizen, U.S. national or U.S. resident alien

You qualify for the full amount of the 2022 Child Tax Credit for each qualifying child if you meet all eligibility factors and your annual income is not more than $200,000 ($400,000 if filing a joint return).  

Parents and guardians with higher incomes may be eligible to claim a partial credit.  

Like other tax credits, the Child Tax Credit is a dollar-for-dollar reduction in your tax.

If your available Child Tax Credit is greater than your tax liability, the Child Tax Credit can only reduce your tax bill to zero — you don’t get any unused portion of the credit back as a refund.

However, you may be able to claim the Additional Child Tax Credit, which allows you to receive up to $1,500 of the $2,000 Child Tax Credit per child as a refund.  This means you get a check for the remaining Child Tax Credit (up to $1,500 per child) after your tax bill is reduced to zero.

[opriepm1]

@marctu I don't think I was clear about the credits. I do have the CTC that I take advantage of. But with the CTC I'm not sure if I can also use the EV Tax Credit.

[marctu]

So the EV credit and CTC could both be taken.   See this for the EV credit qualification:

The AGI for the EV credit, which is a no-refundable credit,  is Modified Adjusted Gross Income ("MAGI").   So, if you're single, and your modified adjusted gross income is over $150,000, you won't qualify for the EV tax credit. The EV tax credit income limit for married couples who are filing jointly is $300,000.  For Head of Household the limit is $225,000.  (See: https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after#:~:...)

So what is MAGI?  Modified adjusted gross income can be defined as your household’s AGI after any tax exempt income and after factoring in certain tax deductions.  So starting with AGI you add back:

• Any deductions you took for IRA contributions and taxable Social Security payments
• Deductions you took for student loan interest
• Tuition and fees deduction
• Half of self-employment tax
• Excluded foreign income
• Interest from EE savings bonds used to pay for higher education expenses
• Losses from a partnership
• Passive income or loss
• Rental losses
• The exclusion for adoption expense

There is no calculator per se for this.   Assuming you have a good idea of your income items you can use your 2022 tax return as a guide in getting to AGI and then add any of items above to get to MAGI.  

[BettieG]

Hi @opriepm1!  The EV credit is a non-refundable tax credit, meaning that you can only benefit from it (or part of it) if you have a tax liability (i.e., the credit can't exceed the amount of tax you owe).  In other words, it can't be used to increase your tax refund or to create a tax refund when you wouldn't otherwise have one.  

Further, there are modified adjusted gross limits on the EV credit:  

• Filing status of Married Filing Jointly:  MAGI cannot exceed $150,000
• Filing status of Head of Household:  MAGI cannot exceed $112.500
• Filing status of Single or Married Filing Separately:  MAGI cannot exceed $75,000

If you exceed those limits, the credit is unavailable.

Neither of these limitations are affected per se by taking advantage of the child tax credit, though it may impact your tax liability.

I hope this is helpful!  If so, please give me a thumbs up!