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W4 to get the 7500$ EV tax credit

How can make sure to get EV tax credit. I always get tax refund when I apply. So what should I change with W4 to make sure I get the 7500$ tax credit?

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Accepted Solutions
Tax Hero Niki
Employee Tax Expert

W4 to get the 7500$ EV tax credit

Hi Akram!

 

So you always get a tax refund, and want to make sure you can claim the EV tax credit this year? In short, there aren’t any changes that you need to make to your W-4, and you still are able to claim this credit if you are getting a tax refund. Read on to find out more.

 

So, you don’t need to owe taxes at tax time to claim this credit. You need to have a tax liability, which is different from owing. When you file your taxes, TurboTax calculates your tax liability, which is driven by your income. Then, when you claim the EV tax credit, you can eliminate up to $7500 of this tax liability. Whatever you had in withholdings throughout the year will then cover what’s left of the tax liability, and the remainder is your tax refund.

 

To clarify other information in this thread, where it says the EV credit cannot be received as a refund, what they are saying is that the credit is nonrefundable, which means that you can’t get back more on the credit than your tax liability, which is different from what you owe when you calculate your taxes.

In other words, if you change your W-4 to factor in the EV tax credit now, what you’ll be doing is reducing your withholdings, and getting bigger paychecks for the rest of the year. At tax time, you won’t see that big refund because you won’t have paid in as much throughout the year.

And finally, if you don’t change your W-4, your paychecks remain the same, and you can look forward to a big refund at tax time. The money is still the same; the difference is the timing.

 

The factor you are thinking of is tax liability. Your tax liability, like I mentioned above, is impacted by your income and your household size. For example, if you are a single filer and your taxable income (income after factoring in the standard or itemized deductions) is greater than $60,000, you will most likely be able to see the full benefit of the EV tax credit.  You can use this income tax table to see where your tax liability lies.

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5 Replies
PoojaT27
Employee Tax Expert

W4 to get the 7500$ EV tax credit

Hi @Akram ,

 

EV credit is a non refundable credit which implies you can only claim this credit against any taxes you owe on your tax return.

You may change your W-4 to reduce withholding so that you would owe when you file your 2023 tax return. Then the EV credit can be applied to reduce your tax to $0. The EV credit cannot be received as a refund, it can only reduce the tax you owe to $0.

Below is a helpful link with more details regarding this credit:

What is an electric car tax credit? 

You will see that the credit is dependent on many factors.

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W4 to get the 7500$ EV tax credit

How to reduce my withholdings?

W4 to get the 7500$ EV tax credit

How to reduce my withholdings on W4 to get the benefit of EV tax credit?

PoojaT27
Employee Tax Expert

W4 to get the 7500$ EV tax credit

@Akram you can use the withholding calculator below to determine how to complete your W-4. 

W-4 Calculator 2023 

Here is an additional resource to help you complete your W-4

What is a W-4 Form? 

 

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Tax Hero Niki
Employee Tax Expert

W4 to get the 7500$ EV tax credit

Hi Akram!

 

So you always get a tax refund, and want to make sure you can claim the EV tax credit this year? In short, there aren’t any changes that you need to make to your W-4, and you still are able to claim this credit if you are getting a tax refund. Read on to find out more.

 

So, you don’t need to owe taxes at tax time to claim this credit. You need to have a tax liability, which is different from owing. When you file your taxes, TurboTax calculates your tax liability, which is driven by your income. Then, when you claim the EV tax credit, you can eliminate up to $7500 of this tax liability. Whatever you had in withholdings throughout the year will then cover what’s left of the tax liability, and the remainder is your tax refund.

 

To clarify other information in this thread, where it says the EV credit cannot be received as a refund, what they are saying is that the credit is nonrefundable, which means that you can’t get back more on the credit than your tax liability, which is different from what you owe when you calculate your taxes.

In other words, if you change your W-4 to factor in the EV tax credit now, what you’ll be doing is reducing your withholdings, and getting bigger paychecks for the rest of the year. At tax time, you won’t see that big refund because you won’t have paid in as much throughout the year.

And finally, if you don’t change your W-4, your paychecks remain the same, and you can look forward to a big refund at tax time. The money is still the same; the difference is the timing.

 

The factor you are thinking of is tax liability. Your tax liability, like I mentioned above, is impacted by your income and your household size. For example, if you are a single filer and your taxable income (income after factoring in the standard or itemized deductions) is greater than $60,000, you will most likely be able to see the full benefit of the EV tax credit.  You can use this income tax table to see where your tax liability lies.

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