Multiple tax credits, husband and wife tax credits.

[RickMachE]

It’s not just Medicare. ACA health plans work the same way.

The credit you get is based on income, so someone with millions or self employed can control their income and get $1k/mo from the government for health insurance because they are “low income.”

Yeah, that's what I meant by aid on making medical insurance payments.

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[Neilthepilot]

So lets be clear for those of us that do better with pictures.
Tax payer X has a Federal tax liability of $10,000.
Tax payer X's employer withholds $10,000 from his or her paychecks for their Federal Tax's.
Tax payer X buys a Mach e and will now receive a tax refund of $7500 after filing his or her taxes.

 

[jojomontag]

So lets be clear for those of us that do better with pictures.
Tax payer X has a Federal tax liability of $10,000.
Tax payer X's employer withholds $10,000 from his or her paychecks for their Federal Tax's.
Tax payer X buys a Mach e and will now receive a tax refund of $7500 after filing his or her taxes.

Only because Tax payer X overpaid by $7500...

$10000 liability - $7500 tax credit = $2500 liability.

$10000 withheld from paycheck - $2500 tax liability = $7500 refund.

The key is the tax credit is deducted from the liability until it reaches zero (no negative liability).

 

[Neilthepilot]

Only because Tax payer X overpaid by $7500...

$10000 liability - $7500 tax credit = $2500 liability.

$10000 withheld from paycheck - $2500 tax liability = $7500 refund.

The key is the tax credit is deducted from the liability until it reaches zero (no negative liability).

Thanks I was pretty sure that's how it worked but sometimes the more you read the less it makes sense.

 

[jojomontag]

Thanks I was pretty sure that's how it worked but sometimes the more you read the less it makes sense.

Yeah... it gets confusing, especially with how many posts and explanations there are... and how Ford and dealers advertise it. In the end, my $48500 will not be $41000 because I won't be able to benefit from the full $7500. But at least it helps me some.

They should be the ones to reduce the sale price by the credit and claim it for themselves--they are sure to always fully benefit from it. But I guess it's not possible for them unless they are listed as the first owner... legal mumbo jumbo.

 

[ahg]

Can you do a Roth IRA conversion, or if you're over 59 1/2, have an IRA or 401(k) you can take withdrawals from? That will boost your taxable income and it will have the effect of getting $$$ out of a pre-tax investment for zero taxes. (I'm pretty sure Texas doesn't have a state income tax.) Heck, even if you are under 59 1/2 and had to pay the 10% penalty for early withdrawal, you'd still come out ahead.

If you do a Roth conversion do it with whatever in your IRA has the most upside potential. Stocks rather than bonds and the stock with the greatest potential gain.

 

[TGIF]

Thanks for clarifying this. I was notified that my Mach-E will be delivered within 2021 and was about to scramble to get my employer to stop withholding my income tax for the remaining paychecks of this year, just so that I could generate enough tax to owe.
Makes much more sense that I will just get a refund from my withheld income so long as it exceeds $7500 in liability after deductions.

You might still want to have the employer reduce or eliminate your withholding. Why let the government have your money for free until you can file and get the refund?

 

[RickMachE]

You might still want to have the employer reduce or eliminate your withholding. Why let the government have your money for free until you can file and get the refund?

In the old days, you could write down a huge number of withholding allowances to reduce it severely. Haven't had a paycheck in a long time, but it doesn't work that way any longer.

Having no tax liability, as explained many times in this thread, is not the same as not owing any tax because you've already given the government your $7,500 tax credit...

https://www.irs.gov/pub/irs-pdf/fw4.pdf

 

[Maquis]

In the old days, you could write down a huge number of withholding allowances to reduce it severely. Haven't had a paycheck in a long time, but it doesn't work that way any longer.

Having no tax liability, as explained many times in this thread, is not the same as not owing any tax because you've already given the government your $7,500 tax credit...

https://www.irs.gov/pub/irs-pdf/fw4.pdf

Since the deductions worksheet is just estimates, you can use that to adjust withholding downward. But if not careful, you could end up in a penalty situation.

 

[RickMachE]

Since the deductions worksheet is just estimates, you can use that to adjust withholding downward. But if not careful, you could end up in a penalty situation.

Right. But with the old form, you could simply write a number of allowances, like "32". You can't do that on the new form. https://www.irs.gov/pub/irs-prior/fw4--2019.pdf

 

[Maquis]

Right. But with the old form, you could simply write a number of allowances, like "32". You can't do that on the new form. https://www.irs.gov/pub/irs-prior/fw4--2019.pdf

Right….I think I had 8 kids (on paper) at one time!

 

[RickMachE]

Right….I think I had 8 kids (on paper) at one time!

I don't remember the number, but one year I relocated. That jacked my "income" hugely, because the money they pay to you for relocation is "income" as far as the IRS is concerned. Given that I had offsetting relocation expenses, that income became zero. But the IRS didn't know that yet. So, I had something like 40 withholding allowances. Put a reminder on the calendar in mid-December so my first check of next year was put back to normal.

Routinely, I would adjust my withholding just to comply with the IRS rule to pay 100% of last year, or blah, blah of this year. It was never close to what the worksheet said, but that didn't get submitted. I believe if you did more than 10, you raised your odds of an audit. Never got one though.

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