EV/Tesla Tax Credit Eligibility

[myj1985]

I had a question about eligibility for the EV/Tesla tax credit. From what I hear, your tax liability needs to exceed the credit amount (in this case $7,500) in order for one to receive the $7,500 refund/credit. What is the definition of tax liability - is it total taxes paid/due for the entire tax year or is it the amount due (or received in case one is getting a refund) in April of any given year? That would make a difference, since if it is defined by what is given or received in April, would someone who is owed a refund by the IRS then not be eligible for the $7,500 EV/Tesla tax credit? Thanks in advance.

 

[bnsfengineer]

I had a question about eligibility for the EV/Tesla tax credit. From what I hear, your tax liability needs to exceed the credit amount (in this case $7,500) in order for one to receive the $7,500 refund/credit. What is the definition of tax liability - is it total taxes paid/due for the entire tax year or is it the amount due (or received in case one is getting a refund) in April of any given year? That would make a difference, since if it is defined by what is given or received in April, would someone who is owed a refund by the IRS then not be eligible for the $7,500 EV/Tesla tax credit? Thanks in advance.

Has nothing to do with a refund as I may be not be totally precise but asked the same question... If you say made 100k and your tax liability is 25k your good. But if you make 30k and have a liability of say $2500...thats all you would get back...no more...hope that helps

 

[ahulett]

It's how much you owe for the tax year. It's independent of any withholding.

For example, if your taxes due at the end of the year after deductions and such, and not including EV credit) is $10,000, and your employer withheld $12,000, then you would get $2,000 refund. If you now throw into the mix the EV credit, your tax liability would go down to $2,500 and you would now get a refund of $9,500.

But, if your tax liability is $5,000 after all your deductions, and then you throw into the mix the $7,500 EV credit, your tax liability is now ZERO. You do not get cash back for the $2,500 - in other words, you lose that part of the credit. So, if your employer withhold $12,000 in this case, you'd get back all $12,000 - you would not get back $14,500.

And to cover my, umm, self, I am not a tax preparer and the above should not be considered tax advice. But, having said that, this is how I understand this credit as I've used it twice now.

 

[carnut4ever]

One strategy you might ask about is to do a partial 401k to Roth conversion. That would create more taxable income to take full advantage of the tax credit.