Talk about making mountains out of mole hills...On your 1040, LINE 44 you will have an amount of tax LIABILITY. (i.e., in 2016 that line on my return was $7,100.) I had $6,100 withheld from my income during the year. The $7500 ITC for my Tesla purchase meant that I owed NO federal tax and I received the $6,100 withholding amount as a refund. My Tesla ended up costing $400 than I anticipated!
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How exactly does the federal tax credit work?
- Thread starter ch3mtrailz
- Start date
travwill
Active Member
It is sort of A & B. You take the credit away from any tax liability you have, thus if you owe $7500 from earnings then you'll be at $0. If you owe $5000 after earnings you'll owe $0. The confusion may be with the type of credit it is. It is a "non-refundable" credit thus if the credit alone takes you negative, then you do not get any of that credit refunded, instead it only reduces tax liability (versus a refundable credit that you would actually get back).
But, the positive for most of us comes into play is that when you use this non-refundable credit to reduce tax liabilities, like most of us have, then when you add all your deductions on later - they are a larger impact since you owe less in taxes - thus you'll get that EV amount back in reality. The main thing is to ensure you will have tax liability after payroll deductions (W2) or taxes paid (1099, etc.). That shouldn't be hard to do, but some people increase their exemptions being claimed on W4 even. Each exemption you claim removes paying taxes on $3500 worth of income).
But, the positive for most of us comes into play is that when you use this non-refundable credit to reduce tax liabilities, like most of us have, then when you add all your deductions on later - they are a larger impact since you owe less in taxes - thus you'll get that EV amount back in reality. The main thing is to ensure you will have tax liability after payroll deductions (W2) or taxes paid (1099, etc.). That shouldn't be hard to do, but some people increase their exemptions being claimed on W4 even. Each exemption you claim removes paying taxes on $3500 worth of income).
BluestarE3
Active Member
Grab a copy of IRS form 8936 and its instructions. They are available for download. You need to go through the entire form, but pay particular attention to Part III of the form which answers your specific questions about which number from your form 1040 to use and how to calculate the amount of credit you qualify for. Plug the calculated credit amount from your 8936 into the specified line on your 1040 and complete the rest of your 1040 to determine the amount of the check the IRS will issue you. If it's still confusing, then consult a tax professional rather than relying on advice from anonymous people on the Internet.
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From the interweb:
"Generally speaking, tax credits only offset tax balances due - meaning if you have low income and owe nothing in tax, you get no benefit from a credit. Whereas, tax rebates are paid to a taxpayer regardless whether a tax is payable. So, that's the difference between a credit and a rebate."
That is the way I had understood it. You pay taxes every year right? ....right? After you've hidden your money offshore or gotten deductions for owning a home excetra, do you owe any money? If you do, you get up to $7,500 of it back. So you do all your taxes and you're left owing a hundred bucks you get that hundred bucks.
Some seem to be saying you can double-dip. So you really owe 10 grand in taxes before you do all your shenanigans and owe nothing after but you then get to take another $7,500 because before all your deductions you owed that or more, even if you would not have had to pay it? Seems that would be barely any different than a rebate and help even more people that don't really need the help.
"Generally speaking, tax credits only offset tax balances due - meaning if you have low income and owe nothing in tax, you get no benefit from a credit. Whereas, tax rebates are paid to a taxpayer regardless whether a tax is payable. So, that's the difference between a credit and a rebate."
That is the way I had understood it. You pay taxes every year right? ....right? After you've hidden your money offshore or gotten deductions for owning a home excetra, do you owe any money? If you do, you get up to $7,500 of it back. So you do all your taxes and you're left owing a hundred bucks you get that hundred bucks.
Some seem to be saying you can double-dip. So you really owe 10 grand in taxes before you do all your shenanigans and owe nothing after but you then get to take another $7,500 because before all your deductions you owed that or more, even if you would not have had to pay it? Seems that would be barely any different than a rebate and help even more people that don't really need the help.
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i don't see A and B as different. A is line 44. B is what you owe. To me line 44 is what you owe. What you paid via witholding or vouchers is only relevant when trying to figure how much of a refund you will get.
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No, line 44 is before deductions. My line 44 was MUCH higher than what I owed last year.
Line 40 is itemized deductions, Line 40 is before Line 44 and after doing the math you get to line 43 which is Taxable Income. Taxes are calculated on Line 43, Taxable income. I think you need to talk to an accountant. You are not making any sense.
Line 44 is not what you owe - unless you made no payments throughout the year.
Good luck.
Now you are making sense and I apologize for not being clear in my earlier statements.
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