RickMachE
Well-Known Member
- Joined
- Jul 1, 2021
- Threads
- 200
- Messages
- 13,123
- Reaction score
- 17,835
- Location
- SE MI
- Vehicles
- 2022 Mach-E Premium 4X, 2022 Lightning Lariat
Just make sure you're understanding it correctly. "I may be eligible based on my tax liability being over the threshold" makes me question that. I think you don't understand.Exactly.. I think you're both saying the same thing. Since historically I have never owed on my taxes, $7500 is not going back into my pocket. So while i may be eligible based on my tax liability being over the threshold I will not be benefitting from it the way it stands now.
Example:
John earns X dollars. John's tax liability, i.e. tax owed, i.e. line 24, is $8,000. John has withheld $9,000 through payroll withholding. John is going to get back $1,000 from the IRS.
John bought a Mach-E, which has a $7,500 tax credit. Since his tax liability is $8,000, John can utilize the full tax credit, and his tax liability is now $500. Since he withheld $9,000, he'll get back $8,500 from the IRS.
Note that the IRS terminology confuses many.
Line 24 is "Total Tax". This is before any credits get applied. If that's $7,500 or more, you're good. If it's positive, but less than $7,500, then you get a partial credit.
There are several ways to increase your tax as the end of the year approaches:
1) Convert a traditional IRA to a Roth IRA, which is considered income. Do the math and convert just enough to raise your tax to cover the credit.
2) Sell stocks, bonds, mutual funds, etc. to generate a long term capital gain, of sufficient amount to cover the tax.
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