TMC is an independent, primarily volunteer organization that relies on ad revenue to cover its operating costs. Please consider whitelisting TMC on your ad blocker and becoming a Supporting Member. For more info: Support TMC

Need Help Understanding $7,500 Tax Credit

Discussion in 'Model 3' started by the_danimal, Jul 7, 2018.

  1. the_danimal

    the_danimal Member

    Joined:
    Jun 28, 2018
    Messages:
    175
    Location:
    Herndon, VA
    I get that the credit is based on liability. But currently, based on my current trajectory, I'm expected to overpay the IRS ~$5K this year. Yikes.

    Either way, since I don't have any liability, does that mean I do not get any of the credit? :eek:
     
  2. JeffK

    JeffK Well-Known Member

    Joined:
    Apr 27, 2016
    Messages:
    5,911
    Location:
    Indianapolis
    Your liability is determined by your income. (It doesn't matter what you've paid)

    Example from 2017, find your taxable income https://www.irs.gov/pub/irs-pdf/i1040tt.pdf

    The tax credit is like you paying an extra $7500 toward your tax liability... so if your liability is over $7500 you'd get your $5K plus $7500 back.
     
  3. fasteddie7

    fasteddie7 Member

    Joined:
    Aug 12, 2016
    Messages:
    676
    Location:
    uniontown PA
    Do you file a 1040, 1040x or 1040a?
     
  4. mekberg

    mekberg Member

    Joined:
    Jan 5, 2015
    Messages:
    263
    Location:
    Madison, Wisconsin
    It's a credit toward your gross tax liability. Assuming you owe at least $7,500 you should be credited for the full amount.

    In your scenario you would be getting $12,500 back.

    You could change your withholdings now to break even at tax time.
     
  5. Haxster

    Haxster Member

    Joined:
    Apr 4, 2016
    Messages:
    743
    Location:
    Silicon Valley
    It's a tax CREDIT. If you overpay by $5K, you'll probably see a $12.5K refund.
     
  6. the_danimal

    the_danimal Member

    Joined:
    Jun 28, 2018
    Messages:
    175
    Location:
    Herndon, VA
    Ok, so it’s just like the home buyers credit in 07/08?

    Appreciate it, not sure why I’m so confused by this, then again, I hate tax law.
     
  7. outie

    outie Active Member

    Joined:
    May 22, 2016
    Messages:
    2,064
    Location:
    SoCal
    Just because you’ve withheld more than you owe does not mean you don’t have tax liability.

    Let’s say you made 200k and your tax rate at 25% you have a 50k tax liability. Despite you’ve withheld 55k so you will get 5k tax refund, you will get $7,500 additional back.
     
  8. JeffK

    JeffK Well-Known Member

    Joined:
    Apr 27, 2016
    Messages:
    5,911
    Location:
    Indianapolis
    Yes, this credit is like other credits. One thing to keep in mind is that this is a non-refundable tax credit meaning that if you don't have the liability you won't get anything above your liability back.

    For example, if you only have an income of $30k and someone you know gives you cash for a Model 3 out of the goodness of their heart, you won't get the full credit.
     
  9. Dave Mac

    Dave Mac Member

    Joined:
    Mar 31, 2016
    Messages:
    26
    Location:
    AL
    Nope. The homebuyer's credit was refundable so liability didn't matter.
     
  10. outie

    outie Active Member

    Joined:
    May 22, 2016
    Messages:
    2,064
    Location:
    SoCal
    No, that credit can carryover afaik. This EV tax credit does not carryover so if you can’t take all of it in the tax year it’s gone.
     
  11. fasteddie7

    fasteddie7 Member

    Joined:
    Aug 12, 2016
    Messages:
    676
    Location:
    uniontown PA
    It should be line 44 on a 1040 it will say tax. If the number on that line is less than $7500 the credit will be reduced to whatever that line is.
     
  12. the_danimal

    the_danimal Member

    Joined:
    Jun 28, 2018
    Messages:
    175
    Location:
    Herndon, VA
    Right, I get that that one carried over where this credit doesn’t. Thanks all!
     
  13. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Well-Known Member

    Joined:
    Jul 12, 2012
    Messages:
    6,934
    Location:
    Maine
    And just in case "non-refundable" confuses anyone reading, it doesn't mean you can't get a refund because of it.
    Non-refundable credits reduce the amount you need to pay and that won't drop below 0.
    But refundable credits act as a payment (they appear as such on the form), so the government will "refund" the money to you even if you have no liability.
     
    • Like x 1
  14. the_danimal

    the_danimal Member

    Joined:
    Jun 28, 2018
    Messages:
    175
    Location:
    Herndon, VA
    You’re right, line 44 is your liability.
     
  15. ewoodrick

    ewoodrick Member

    Joined:
    Apr 13, 2018
    Messages:
    671
    Location:
    Buford, GA
    It is a credit on the TAX that you owe. It has nothing to do with what you have been taking out of your paycheck.
    Go to last years taxes and look for a line that I believe is labeled TAX DUE. Is that more than $7,500, then you are good.

    The reality is, that if you want to pay the minimum each month, then when you buy a car, you would adjust your deduction to take out $7500 less
     

Share This Page

  • About Us

    Formed in 2006, Tesla Motors Club (TMC) was the first independent online Tesla community. Today it remains the largest and most dynamic community of Tesla enthusiasts. Learn more.
  • Do you value your experience at TMC? Consider becoming a Supporting Member of Tesla Motors Club. As a thank you for your contribution, you'll get nearly no ads in the Community and Groups sections. Additional perks are available depending on the level of contribution. Please visit the Account Upgrades page for more details.


    SUPPORT TMC