This is correct. It comes off your total tax liability for the year. It doesn't matter if you would otherwise get a refund or not.
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Discussion: Model Y General Waiting room for orders placed After January 2023
- Thread starter acpd
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reference for non-refundable tax credit
turbotax.intuit.com
What Is the Difference Between a Refundable and a Nonrefundable Credit?
A tax credit can substantially reduce the amount of tax you owe, or even make your tax refund bigger. However, not all tax credits are alike. Tax credits can be refundable or nonrefundable, and sometimes partly refundable.
turbotax.intuit.com
scionbox
Member
I agree with @Ray_R . The tax credits has nothing to do with the tax withheld on your paycheck (this is the taxes you prepaid against the "estimated taxes owed").
Taxes owed = tax liabilities on your taxable income.
Non-refundable tax credits example:
#1 If you make $150k/year, after all non-taxable deducdtions (401k, FSA, etc) your taxable income is $100k. That leads to 8.5K tax liabilities (or taxes owed) to the IRS. You had your company withheld $6.5K from your paychecks. Then you will need to cut $2k check to the IRS with your tax return. If you are claiming $7.5K EV credits, you will get a $5.5K (6.5K+($7.5K-$8.5K)) refund instead. You get full $7.5K credits because your tax liabilities (or tax owed) is $8.5K.
#2 Same as above, if your tax liabilities are $4.5K, you will get $6.5K refund ($6.5K + ($4.5K-$4.5K)), the EV credits are reduced to $4.5K which is the amount you owed. The $6.5K was your own money that was withheld on your paychecks.
Refundable tax credits example:
#3 Same as #2 above, IF this is refundable EV credits, you will get $9.5K refund ($6.5K + ($7.5K-$4.5K)), you will still get full $7.5K credits even you owe less than $7.5K.
@thetuk Are you sure to be able to claim the $7.5K credits next year? If so, you can reduce your withholing by updating your W-4. That way, you can get the refund sooner and not in the middle of next year.
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That is my understanding as well. The credit applies toward your liability, and if your liability is less than the credit they will not give you the difference. Example - if your liability is $5,000 the credit will reduce it to $0 and you will not get the other $2,500. Your tax refund would then depend on how much you paid in taxes throughout the year plus any other credits that are refundable such as the Child Tax Credit.
Got an update on my late January order today.
Order date: 01/25. EDD: Jan-March
1/31 update EDD: 03/17-03/31
SoCal
Order date: 01/25. EDD: Jan-March
1/31 update EDD: 03/17-03/31
SoCal
This is from the IRS website:reference for non-refundable tax credit
What Is the Difference Between a Refundable and a Nonrefundable Credit?
A tax credit can substantially reduce the amount of tax you owe, or even make your tax refund bigger. However, not all tax credits are alike. Tax credits can be refundable or nonrefundable, and sometimes partly refundable.
A nonrefundable tax credit allows taxpayers to lower their tax liability to zero, but not below zero.
The tax credit is against the tax liability, not how much you owe after withholding.
It seems many folks get confused between total tax liability and what taxes they might owe at the end of the year after withholdings. It’s tough to explain on an Internet forum.
They send carrier pigeons, takes awhile to fly to you, just sit tight.
scionbox
Member
The quote is correct. There is a difference between the tax owed vs tax due. Tax due is tax owed minus tax withheld on your paychecks (and other applicable credits besides EV credits).reference for non-refundable tax credit
What Is the Difference Between a Refundable and a Nonrefundable Credit?
A tax credit can substantially reduce the amount of tax you owe, or even make your tax refund bigger. However, not all tax credits are alike. Tax credits can be refundable or nonrefundable, and sometimes partly refundable.
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scionbox
Member
This is not correct at all.
This is correct.
What they said.
simply if you are single and have income of over $67k or married and have income of 92k you will get the whole credit. Regardless of how much you withhold. Either you get your withholding back or owe nothing.
This statement does not consider the fact that you may have other dependent credit, education credits and such.
@scionbox - according to the IRS website - You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less.
Credits for new clean vehicles purchased in 2023 or after | Internal Revenue Service
You may qualify for a clean vehicle tax credit up to $7,500 if you buy a new, qualified plug-in electric vehicle or fuel cell electric vehicle.
The correction to this would be the following:
$50k taxes owed
$7.5k tax credit.
——————————-
42.5k tax owed after credit
50k withheld on payroll
———————————-
7.5k refund.
The refund is not from the tax credit. The refund is from the excessive withholding.
Better way to understand the “non refundable” credit is like this
5k taxes owed
5k ev tax credit claimed
——————————
0 taxes owed
5k taxes withheld
——————————
5k refund.
In the scenario above you lose out on 2.5k credit because it is no refundable. Non refundable credit will always lower your tax liability as a total. But once your tax liability hits zero, even if you have credits left, you can’t use it.
Withholding, if you have excessive withholding, you will get it back. In both the case above.
Teedub21
Member
Definitely not how this works. Your total tax liability for the year has to be $7500 or more. Doesn’t matter what your withholdings for the year were. Doesn’t matter how much “more” you owe at the end of the year. It’s your total tax bill. You made $75,000. You owe $12,000. Say you paid $12,000 over the year out of your check. Great! Now you get $7500 back as a refund. This has been covered over and over here.
No. You can only claim the credit in the year you take the delivery.
You can use prior years income to determine eligibility. For example, in FY2023 you income is 180k and don’t qualify for the tv tax credit but in TFY2022 you income was only $130k then you can use that years income to claim the credit in FY2023. But if you took delivery in 2023, you cannot claim the tax credit in 2022 tax return.
For sure!! Glad to assist my fellow Tesla owners/soon to be!I thought I understood it before. Thanks for clarifying it this way. That makes sense
Not at all. Your post actually helped me understand the situation. I did some search after reading yours. It became more clear to me now.
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