How the tax credit works?

gafear

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I couldn't find a similar thread, but I have a (probably) stupid question.

The language IRS uses says that you can only claim the full credit if you have a tax obligation of more than 7.5k. My question, does that mean that I need to withhold less to get underpayment to the government so I own them more than 7.5k?

To simplify
A person earns 100k and has a tax rate of 20% - so the person owes IRS $20k. This person withheld $2k every month. On the tax return this person would get a $4k refund plus the $7.5k EV credit. Is this correct? Or the IRS would not give the credit since there is no money owed to the IRS?

Sorry if thjs has been answered before, I moved here 5 years ago and still don't understand the tax legislation of this country
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Mach E JT

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If you have a tax liability of exactly 7,500 and you paid exactly 7,500 in taxes then you would expect to neither get a refund nor owe the federal government any further money.

If you buy a MME in this exact scenario, you would get a check for 7,500 from the federal government.

ETA - If you have a tax liability of less than 7,500 then the maximum you can receive is your tax liability. If you have a tax liability greater than 7,500 then you will receive the entire 7,500.
 

AZBill

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No, it is based on your total tax bill, not on how much is withheld. Some examples

If your taxable income ( not gross) is $40K, you would owe roughly 12%, so your tax bill would be $4800, and that is all the credit you could get. But if your taxable is 100K, you would owe $18200, so you get the full credit.
 

Orangefirefish

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Your total tax is the key. I would just withhold less. Better than waiting around for Uncle Sam to give you your money back. This year it took a few months! ?
 


db4z

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Your withholding only affects how much you owe or will get refunded when you file taxes (the difference between what tax amount you pre-paid with withholdings and what your calculated tax bill is). If your tax liability/obligation (line 16 on the 2020 file 1040) was over $7500 last year and your tax situation is similar this year, you should be eligible for the full amount. If you tax liability is less than $7500 because you are retired, unemployed, etc. then you can only use the credit to reduce your tax liability down to zero, or in other words, the rebate would pay all your taxes and you would get back any withholdings as a refund since technically you owe nothing with the credit applied.

Ideally you could reduce your withholding such that you are not waiting until next April to get your full $7500 (by instead getting bigger paychecks for the rest of this tax year). However, depending on your tax situation and ambition, it can be difficult to pre-plan exactly what your tax liability will be next year.

For me, I've reduced my withholdings a little bit, but since I haven't bought the car, not enough to compensate for the full $7500, such that if I end not buying it for some reason, I will have enough pay periods left in the year to increase my withholdings afterwards to make up for it so I don't end up with a huge tax bill next year (I think the IRS will charge you interest if you owe more than $1000 because you under withheld). If I do buy the car, then I can decrease my withholdings even further for the rest of the year.

To keep things simple you can just wait and get the full $7500 (or the amount equal to your tax liability if it is less than $7500) as refund when you file your taxes.
 

BMT1071

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To simplify
A person earns 100k and has a tax rate of 20% - so the person owes IRS $20k. This person withheld $2k every month. On the tax return this person would get a $4k refund plus the $7.5k EV credit. Is this correct?
Yes. The person would receive an $11.5k refund check from the IRS.
Some people have discussed reducing their withholding so they have more money in their pocket now instead of waiting for the big refund next year at tax time.
 

TRP

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Here's the example our tax folks told me.........

Based on income you have a tax liability...let's say $26000
Deductions paid in total...........let's say $28000
So you paid in more than required so a refund is issued. $2000 in this case.
Now, applying the $7500 tax credit.
Subtract that from $26000 = $18500 required to be paid in.
As above the actual amount paid in was $28000. So $28000-$18500=$9500 refund.

Use your last years tax documents to calculate this for yourself. YMMV
 

tacobellcow

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If the tax credit is based on when you buy the vehicle, is there a spot on the taxes to denote your purchases/ownership date? Lets say I take ownership Jan. 1, 2022,I have to wait more than a year for my 2022 taxes to be paid. Is my in line ahead of those who get one months later? Or is it based on when you file taxes?
 

leeman

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Said he use the rebate at text time and not to play with your deductions. The tax credit will help iron out any issues at the end during tax time if there's anything left over from the credit it will be rolled over to the following year.
 

macchiaz-o

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If the tax credit is based on when you buy the vehicle, is there a spot on the taxes to denote your purchases/ownership date? Lets say I take ownership Jan. 1, 2022,I have to wait more than a year for my 2022 taxes to be paid. Is my in line ahead of those who get one months later? Or is it based on when you file taxes?
Check here for answers:

https://www.irs.gov/instructions/i8936

https://www.macheforum.com/site/thr...hase-is-eligible-for-the-full-tax-credit.991/
 

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Here are the links:

Form 8936: https://www.irs.gov/pub/irs-pdf/i8936.pdf
Form 8911: https://www.irs.gov/pub/irs-pdf/i8911.pdf
and the certification IRC 30D: https://www.irs.gov/pub/irs-pdf/i8911.pdf
if your are in NJ: https://nj.gov/mvc/vehicletopics/taxexempt.htm

in addition you will need Certificate of Origin from the manufacturer;
Copy of doc's that vehicle is currently registered and tagged under your name. You need to check with your accountant what exemptions apply if your vehicle is registered under your business.

I am not a tax consultant so I gave everything to my tax preparer. The vehicle must titled, registered and tagged in your name in the tax year that you intend to file the claim. It is very important for you to check that the manufacturer, the model year, the specific model is listed in the most current publication of IRS's IRC 30D list. You can be a co-owner and the vehicle does not have to be garaged at your primary residence.
 

tacobellcow

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macchiaz-o

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it seems like the IRS docs don't rely on dates as much as they rely on the user to specify that they qualify for 100% or 50% of the incentive. My worry is that I will have qualified and after filing the taxes I won't get that credit.
??? The date of purchase is one of the small handful of questions. Try filling out the form now, hypothetically for your situation. I think that may address your concerns?

Ford Mustang Mach-E How the tax credit works? Screenshot_20210719-083311
 

tacobellcow

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??? The date of purchase is one of the small handful of questions. Try filling out the form now, hypothetically for your situation. I think that may address your concerns?

Ford Mustang Mach-E How the tax credit works? Screenshot_20210719-083311
Yes, thank you! Despite my earlier efforts, I am still a moron and missed this the first time through.
 
 




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