How to make the $1875 work for me?

[woodisgood]

Lol. This thread is a great example how something really simple can blow up into a complicated discussion. Next up: Do I turn the clock an hour forward or back for DST and will I lose or gain time???

While I get your point, this happens nearly every time someone asks OP's question, which is fairly frequently.

It ends up being "complicated" because financial situations are as unique as snowflakes. Knowing OP's financial situation, the question would take a nanosecond to answer and be simple. But a quick-trigger blanket answer like the OP is looking for without knowing anything about his/her finances is next to impossible, and instead has no direction other than to devolve into a discussion about how taxes actually work and the associated semantics.

 

[Sir Guacamolaf]

So a basic question,

- If at the end of the year, I OWE (i.e. underpaid my taxes by) $1000, do I get a $875 refund, or do I get no refund, and not owe anything?

 

[Spice]

Look at line 15, page 2 of your 1040. If you owed more than $1850 in tax you'll see a benefit (assuming you are earning the around the same income in 2019). Taxes aren't rocket science.

 

[Sir Guacamolaf]

Line 15 is total tax, and it's on Page 1. Rocket science is easier frankly!

Lets simplify,

Joe's total tax bill for the year was $2000.
Joe made a payment in total of $1000.
Joe buys a Tesla.

a) Does Joe - get a $875 refund?
b) Does Joe - get a $0 refund and has to pay $0 more to IRS?

a or b? don't confuse me

 

[Spice]

Line 15 is total tax, and it's on Page 1. Rocket science is easier frankly!

Lets simplify,

Joe's total tax bill for the year was $2000.
Joe made a payment in total of $1000.
Joe buys a Tesla.

a) Does Joe - get a $875 refund?
b) Does Joe - get a $0 refund and has to pay $0 more to IRS?

a or b? don't confuse me

Tax owed 2000 - credit 1850 = 150 tax remaining to be paid - witholdings 1000 = 850 overpayment that you can either request to be refunded or applied to next year's taxes ......

Also it's page 2 you dingus. I've attached the 1040 from the IRS for you to read.

 

[Sir Guacamolaf]

Also it's page 2 you dingus.

Thank you!

For those interested ..
Dingus: A person who occasionally pisses you off, but at the end of the day you still love them. They're usually your best friend who makes fun of you from time to time. Dingus can be used as a comment when they irritate you, or in a few cases, it can be endearing.

and FTR, Dingus (me) Doofus (you)

 

[OCR1]

I’m guessing OP doesn’t do his own taxes. People frequently confuse tax liability with refunds or taxes owed. You don’t have to make a lot to have a tax liability of at least $1,875. But it’s possible if you are retired.

 

[animorph]

No, it just means you don't owe anything on April 15th above what you've already paid in. If my IRS tax amounted to $10,000 and my employer withheld $11,900 then I'm due a refund of $1900. If I bought a Tesla this year and my IRS tax and employer withholding remained the same then my refund is $11,900 - ($10,000 - $1875).

The basic equation for the refund the OP will get next April is:

refund = amount_withheld - max( irs_tax - 1875, 0 )

The OP needs to look on his tax form to see how much his total IRS tax was last year (forget about refunds, etc).

This is about as clear as it gets. The problem is that "tax liability" is about as clear as we can say it, but many mistake it to be "tax owed on April 15th".

Rearranging FoverM's equation and dropping the tax credit part:

irs_tax = amount_withheld - refund
where:
irs_tax = Total Tax (= tax liability), line 15 on form 1040, must be greater than $1875 to get the full EV tax credit
amount_withheld = Total Payments, line 18 on Form 1040
refund = Amount you overpaid, line 19 on Form 1040, or the negative of line 22 on Form 1040 if you owed.

The EV tax credit is subtracted from your tax liability, which is "irs_tax" here. As long as your withholding payments during the year minus the refund without the tax credit is equal to or greater than $1875 you get the full tax credit. If irs_tax is less than $1875 but still greater than $0 your tax credit will be equal to irs_tax and you will pay $0 in taxes. You can look at your 1040 for 2018, line 15 to see last year's tax liability, if you expect 2019 to be similar. Or you can sum up your withholding for 2019 and guess at your 2019 refund. There are also online tax calculators that can help.

 

[Federico]

It doesn't matter if you owe or got a refund check on your 2018 taxes, the credit only apply to what you are suppose to pay to Uncle Sam, not if you over paid or paid less during the year trough your employer.

The best way to know is check your 2018 1040 Form. To have a idea, if you are single without dependents and you make at least $30,000 per year, most likely you will use the full $1,875 credit (there are more variables of course), or you can use a Federal income tax calculator like this one.

Tax Calculator - Estimate Your Tax Liability

fill out with your tax information (numbers) and you will get an estimated tax liability, as long is more than $1,875/3,750/7,500, you should be able to take advantage of the full credit.

 

[Robert A]

I'm a CPA and the tax credit is figured on form 8834. The amount is limited to your total tax liability, which is the total taxes before income tax withholding and estimated tax payments. The total tax liability is generally the amount shown on line 13 of the 2018 form 1040.

As long as that liability is greater than $1,875, you'll receive a full credit in the current year, even If you are due a tax refund. If the liability is less than $1,875, the excess is lost.

 

[Nevada Jen]

Really, it is not that hard to figure out. Pull out last years taxes and look at the total tax liability (lts around line 15 on the 1040 form). If it is more than 1875, you get a credit for that 1875, assuming your life is about the same as it was last year. Credit, as in the IRS treats it as if you already paid that amount in to them. Whether you get a refund depends on whether you have over paid your taxes for the year. I can't imagine there are a lot of people driving Tesla's who don't have a total tax liability of 1875 a year.

 

[ItsNotAboutTheMoney]

While I get your point, this happens nearly every time someone asks OP's question, which is fairly frequently.

It ends up being "complicated" because financial situations are as unique as snowflakes. Knowing OP's financial situation, the question would take a nanosecond to answer and be simple. But a quick-trigger blanket answer like the OP is looking for without knowing anything about his/her finances is next to impossible, and instead has no direction other than to devolve into a discussion about how taxes actually work and the associated semantics.

"
If you are not filing as a regular individual (or jointly), or you use the vehicle for business, see a CPA. Otherwise, it's quite simple: your Federal income tax liability for tax year 2019 will be reduced by $1,875, but not to less than $0. Tax liability is the total amount of income tax the IRS expects you to have paid for the tax year. So you'll be up to $1,875 better off. Whether it's more money refunded, or less due to pay when you file depends on how much tax you paid during the year compared to your tax liability.
"

I don't think it's complicated at all for most people.

Business taxpayers or business use makes it more complicated and is best left to qualified people.

 

[woodisgood]

"
If you are not filing as a regular individual (or jointly), or you use the vehicle for business, see a CPA. Otherwise, it's quite simple: your Federal income tax liability for tax year 2019 will be reduced by $1,875, but not to less than $0. Tax liability is the total amount of income tax the IRS expects you to have paid for the tax year. So you'll be up to $1,875 better off. Whether it's more money refunded, or less due to pay when you file depends on how much tax you paid during the year compared to your tax liability.
"

I don't think it's complicated at all for most people.

Business taxpayers or business use makes it more complicated and is best left to qualified people.

I think fewer people understand liability, refunds, credits, and deductions than you think (or have taken the time to). Yes it ends up being pretty straightforward for a majority of people but you can’t say that for a given person not knowing anything about their situation.