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Federal EV tax credit when it comes to filing

Discussion in 'Model 3' started by miltymoots, Aug 11, 2018.

  1. miltymoots

    miltymoots Member

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    Warning: I am British, not American so getting used to the tax system here, also not a tax expert at all... also I might use incorrect language I apologize...

    Background - I pay most of my taxes Fed & State in my pay check. When it comes to the end of the year I owe them a little or they owe me a bit...

    Reading up on the Federal tax incentive, it says something along the lines of “this is a non refundable tax credit”, meaning I think, “dont expect a check for $7500” (assuming you deliver before end of 2018 - I did).

    So my question, how exactly do I receive this tax credit? Does it just reduce my taxable income by $7500, and therefore if I overpaid through my paycheck I will get a refund? Or, if I am already “pre-paying” my tax and I zero out at end of year, am I out of luck? ... Confused :(
     
  2. Snow Drift

    Snow Drift Slip Start: [Activated]

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    #2 Snow Drift, Aug 11, 2018
    Last edited: Aug 11, 2018
    If throughout the year your individual (non-business) Federal Tax Liability was $7,500 or more, you are entitled to utilize all of the credit. If it was less, you can only utilize a portion, or none.

    The non-refundable language means that if you only had a Federal tax liability of $5,000, you will reduce it by $5k, and NOT get a check for the remaining $2,500.

    If your Federal tax liability was $7,500 and you paid $7,500 via paycheck reduction (W2 employee) or pre-paid Quarterly taxes, then you WILL get a refund check for $7,500. ...Or more, if you paid even more and get a refund normally from the IRS for overpayment.
     
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  3. Pkmmte

    Pkmmte Le meow

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    Your paychecks will remain the same but you'll get $7,500 added to your refund when you file taxes next year. That is, assuming your tax liability is at least that.
     
    • Informative x 1
  4. woodisgood

    woodisgood It's walnut, beech

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    Welcome to our delightful tax system.

    A credit is an amount that is subtracted from your "liability" (what you owe). In other words, it reduces the taxes that you owe by the amount of the credit. In this case, you are getting that full $7,500 (by paying $7,500 less in taxes) IF you owe the government $7,500 or more. For many people, it's $7,500 in your pocket. WHEN you pay the government is largely irrelevant - in your case it gets cut out of each paycheck. If too much gets cut out, then you get a refund at tax time. If too little gets cut out, you end up owing at tax time. We usually get a refund at tax time, and are expecting that to be $7,500 larger.

    This is in contrast to a deduction, which reduces your income by the amount of the deduction (so you are taxed on less of your total income).
     
    • Informative x 1
  5. miltymoots

    miltymoots Member

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    Thanks everyone that has cleared it all up nicely!!
     
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