Way to Increase Federal Tax Amout pre-paid for EV tax credit

Don't change your withholding.  It's not whether you get a refund or a tax due. And the withholding and estimated payments doesn't matter. It's if you have a tax liability on your income. Look at your 1040 line 22 for total tax. So as long as Line 22 is more than $7500 (before applying the credit), you'll get the whole credit back.

The EV credit only reduces the tax liability on 1040 line 22 to zero. Then you will get back all your withholding. But it doesn't reduce any other taxes on line 23 like self employment tax.

 

If the tax on line 22 is less than  7,500 and 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.

the credit is limited to your tax liability (before certain credits/additional taxes) . The amount withheld does not matter.  selling stocks to generate gains may increase your tax but you would have to do a tax calculation to see how much gain you would need to be realized to increase your tax applicable tax liability to $7,500 or more. depending on your income some long-term capital gains could be taxed at 0% which doesn't help. if there are net short-term capital gains, they are taxed like wages.  

here is one tax calculator. there are others. if you use several different ones, you will likely get different results depending on whether they reflect 2023 or 2022 laws. 

https://filemytaxesonline.org/calculate-your-tax-refund/ 

The credit is based on your tax liability, not withholding.  Your tax liability is what the government keeps at the end of the year, after the tax is computed and all the withholding, deductions, credits, and refunds are taken into account.  It is shown on line 22 of your tax return.  (Income tax liability does not count self-employment tax or the various penalties for problems with IRAs, HSAs, and so on.  The EV credit can't offset those taxes.)

 

Assuming your tax liability was $5000, if you want to use the full benefit of the credit, you need to find some way of increasing your taxable income so that you pay more tax.  (Up to $2500 more tax, in your case.  Generally, that would correspond to about $11,000 more of taxable income.)

 

Easy things would be to sell investments that have made a profit, like stocks.  Do you have stocks with an $11,000 profit you could sell (not total value, just the gain over the purchase price?).  However, be aware that if you like those stocks and want to keep owning them, you should wait 30 days before re-buying them.

 

Or you could convert a traditional pre-tax IRA or 401k to a Roth IRA or 401k, that will create taxable income.  (You can convert just part of your account if your account is with more than $11,000.  You don't have to convert the whole thing all at once.)

 

Or, if you are making pre-tax IRA or 401k contributions, change over to after-tax or Roth contributions until the end of the year, that will also create more taxable income.  If you contributed to a pre-tax traditional IRA, you could recharacterize that as a Roth contribution, or convert it to a Roth IRA, to create more income tax that can be offset by the credit.

 

If you expect a bonus in January, could you persuade your employer to pay it in December?

@Jay J1 Line 22 of your tax return is all that matters. You are eligible for $7500 or whatever is on Line 22 (prior to posting the credit)

 

the withholdings on the W-2 have nothing to do with this.  The withholdings on the W-2 are simply the downpayment against whatever your tax is.  Tax is ONLY calculated on a tax return; it is not calculated on a W-2 or paystub.