Federal withholding NJ

[HazelJ]

Hello, I am planning on purchasing an Electric vehicle that is eligible for the $7500 tax credit. I work quite a job under which I get paid hourly plus sales compensation. My income is roughly around 75k in New Jersey. How many dependents should I claim to bring my federal tax liability up to 7500 so I can claim the full or at least close to the full amount of the credit? 

[JohnW152]

It depends. 

It's based on more factors than simply income -- you need to take into account projected filing status, any other credits you might be entitled to, any deductions you might have, any additional non-salary income. 

And, it's not always best to add dependents -- you can simply request extra withholding each pay period.

There are a couple of very good calculators you can use to estimate your needed withholding.  You'll simply need to know what your filing status will be, the number of dependents you'll claim, your expected income, and deductions, and a few other factors.

TurboTax has a W-4 Calculator that will help you calculate your withholding for tax year 2023. 

The IRS, also, has a very useful Tax Withholding Estimator. 

And, finally, you can use the TurboTax program, itself.  See the TurboTax Help article How do I update my 2023 withholdings and print a new W-4? for more information.

You might also see the IRS’ Credits for New Clean Vehicles Purchased in 2023 or After, to make sure you’ll qualify for the credit.

[HazelJ]

I file as single, zero dependents. I take the standard tax deduction. I have a Roth IRA, under which I take out 8%. I have about $300 in deductions for student loan interest. I pay around $182 per pay period ($4732)  in total for pretax deductions for the year, that includes my HSA and insurances.  I don't have any other deductions I take and I expect my gross income to be around 70-75k. The car that I'm purchasing won't be manufactured until around May, but it qualifies for the whole $7500 tax credit. There's no sales tax on the car purchase and NJ has a $4000 deduction on the price or the EV I'm getting which is taken off the total price of the car, not sure if that matters or will apply in the federal EV tax credit situation. I want to figure out what to do before my next paycheck because I don't want to end up having any issues. If I'm able to bring my federal tax liability to 7500 that would be great, but I'm fine with getting as much as I can from it. I tried using the calculators and I honestly still don't know what to do or how much to withhold. Please let me know if there's anymore information I need to provide. Thank you!

[KrisD15]

How you file a W-4 determines the TAX WITHHOLDING not your TAX LIABILTY.

For examples, lets say your TAX LIABILTY is 2,500. 

You can't change that with a W-4 or the number of dependents you claim for withholding. 

All you can change is how much tax you pay out of your paychecks. 

Your tax liability is calculated on your tax return. 

Say you do your tax return and your TAX LIABILTY is 2,500.

Lets say you have 3,000 withholding. 

You'll get a 500 refund. 

Lets say you have 2,000 withholding.

You'll owe 500. 

Same tax liability regardless of your withholding. 

You pay the same amount of tax, just one way it is collected throughout the year from your paychecks, the other way you pay LESS throughout the year and the rest when you file. 

If you purchase an Electric Vehicle and get a 7,500 credit

and if your tax liability is 2,500

7,500 credit takes the tax liability to zero, 5,000 credit is carried forward

Lets say you have 3,000 withholding. 

You'll get a 3,000 refund and 5,000 carried forward. 

That 3,000 is just a return of the money you already paid. 

If you purchase an Electric Vehicle and get a 7,500 credit

your tax liability is 2,500

7,500 credit takes the tax liability to zero, 5,000 credit is carried forward

Lets say you have 2,000 withholding. 

You'll get a 2,000 refund and 5,000 carried forward. 

That 2,000 is just a return of the money you already paid. 

The credit has the same effect on your Tax Liability regardless of your withholding. 

[HazelJ]

How do I increase my tax liability to 7500 then? That's what I am trying to understand. 

[MayaD]

You can't just increase your tax liability. Your income tax liability is determined by your earnings and your filing status.