Tax Credit Question (fairly time sensitive)

[Baseball1516]

Sorry for starting a new thread, but I am trying to get an answer before my purchase on Friday. I have reached out to my tax professional, but, with the holiday I am not confident I will receive an answer before Friday.

I understand that tax credit situation may change, but I am concerned with the current law, as I am planning on purchasing the vehicle on Friday.

My question is this; is it my total tax liability for the year that matters or the amount I may owe the IRS in April?

For example, if I make 125k a year, I clearly have paid more than $7500 to the federal government throughout the year. However, based on my withholdings, I may only need to cut a check to the IRS for 2k in April (or they may actually owe me). If I only owe the IRS 2k in April, but I paid them 25k in taxes throughout the year, am I entitled to the full benefit of the $7500 credit? If so, how does that work practically? Will the IRS cut me a check for $5500? I understand they would not cut me a check if my total tax liability was only 2k. In my hypothetical, I paid 25k in taxes throughout the year and then only owe another 2k in April.

Hope this makes sense and happy holidays!

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[Motomax]

I understand they would not cut me a check if my total tax liability was only 2k. In my hypothetical, I paid 25k in taxes throughout the year

I think you answered your own question here lol.

 

[RickMachE]

Answered here - https://www.macheforum.com/site/thr...usband-and-wife-tax-credits.7591/#post-275961

The tax credit is taken against tax owed, line 24. Your withholding, or estimated tax payments that you made, is IRRELEVANT.

In the example you provide, if your tax owed is $27,000, you can easily deduct the $7,500 tax credit. Then, in your example, they will auto deposit $5,500 to your bank account.

 

[Eraser]

Sorry for starting a new thread, but I am trying to get an answer before my purchase on Friday. I have reached out to my tax professional, but, with the holiday I am not confident I will receive an answer before Friday.

I understand that tax credit situation may change, but I am concerned with the current law, as I am planning on purchasing the vehicle on Friday.

My question is this; is it my total tax liability for the year that matters or the amount I may owe the IRS in April?

For example, if I make 125k a year, I clearly have paid more than $7500 to the federal government throughout the year. However, based on my withholdings, I may only need to cut a check to the IRS for 2k in April (or they may actually owe me). If I only owe the IRS 2k in April, but I paid them 25k in taxes throughout the year, am I entitled to the full benefit of the $7500 credit? If so, how does that work practically? Will the IRS cut me a check for $5500? I understand they would not cut me a check if my total tax liability was only 2k. In my hypothetical, I paid 25k in taxes throughout the year and then only owe another 2k in April.

Hope this makes sense and happy holidays!

I posted a break down that goes over your scenario here. Hopefully that clears things up.

 

[MustThee?]

Answered here - https://www.macheforum.com/site/thr...usband-and-wife-tax-credits.7591/#post-275961

The tax credit is taken against tax owed, line 24. Your withholding, or estimated tax payments that you made, is IRRELEVANT.

In the example you provide, if your tax owed is $27,000, you can easily deduct the $7,500 tax credit. Then, in your example, they will auto deposit $5,500 to your bank account.

Agreed with the other responses. Tax credit is against tax liability. If your tax liability is at least 7,500 then you get the full benefit. Like you said, if your liability was 25k then after the credit your remaining liability will be 17,500. If your withholding was higher than 17,500 then you get a refund.

 

[Nklem]

If you buy two, it’s $15K…….

 

[MustThee?]

If you buy two, it’s $15K…….

Very true. And if you buy two and sell one, it’s still $15K…?

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