US Federal EV Tax Credit - Things to know

[hls811]

I hate to dig up an old post, but came across this thread while researching this exact issue. I'm NOT an accountant and don't understand this at all (I'll be waiting until 2022 until I get my MME anyway, so this may be irrelevant) - but....

On my last 1040, Line 16 shows roughly $25,000. Line 24 shows $16,000 - in different threads I've seen both listed as the line to reference - so either way I think I cleared the $7500 liability...

My main question is, last year (and most likely this year) I ended up getting a refund... The person who does my taxes is sure that with it being a 'non-refundable credit' - I would NOT get anything back of the $7500 (non-refundable), it would simply pay off IF I owed... Is that true, or based on the info above I would get a refund of $7500 (+ whatever else I'm entitled to as part of my refund?)

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[RickMachE]

I hate to dig up an old post, but came across this thread while researching this exact issue. I'm NOT an accountant and don't understand this at all (I'll be waiting until 2022 until I get my MME anyway, so this may be irrelevant) - but....

On my last 1040, Line 16 shows roughly $25,000. Line 24 shows $16,000 - in different threads I've seen both listed as the line to reference - so either way I think I cleared the $7500 liability...

My main question is, last year (and most likely this year) I ended up getting a refund... The person who does my taxes is sure that with it being a 'non-refundable credit' - I would NOT get anything back of the $7500 (non-refundable), it would simply pay off IF I owed... Is that true, or based on the info above I would get a refund of $7500 (+ whatever else I'm entitled to as part of my refund?)

You should get a new tax preparer, your current one is not very good. Line 24 is what matters.

A nonrefundable credit essentially means that the credit can't be used to increase your tax refund or to create a tax refund when you wouldn't have already had one. In other words, your savings cannot exceed the amount of tax you owe. That is line 24.

 

[hls811]

You should get a new tax preparer, your current one is not very good. Line 24 is what matters.

A nonrefundable credit essentially means that the credit can't be used to increase your tax refund or to create a tax refund when you wouldn't have already had one. In other words, your savings cannot exceed the amount of tax you owe. That is line 24.

LOL; I'm not saying how she's related to me. The reference to line 16 was in the first post on this thread:

If you’re in doubt regarding your tax liability you can find that information on line 16 on your 1040 tax form. As long as this number is equal to or greater than $7,500 you’ll take full advantage of the tax credit.

But for clarification... if I'm entitled, I would get the $7500 back as part of my refund check, right?


Whats also so confusing is just how unclear this all is.. This is just one of MANY articles I've read trying to decipher this:
https://www.cnet.com/roadshow/news/ev-tax-credit-biden-bill-senate/

Is the EV tax credit refundable or nonrefundable?
Currently, the tax credit is a nonrefundable credit when you file your taxes. That means that the government does not cut you a check for $7,500 -- all it does right now is reduce your federal tax bill.

What if I owe money at tax time when claiming the credit?
The EV tax credit is currently a nonrefundable credit, so the government does not cut you a check for the balance. Let's say you owed the federal government $10,000 in taxes when filing your 2021 taxes. Let's also say you purchased a Ford Mustang Mach-E in 2021, which is eligible for the full $7,500 credit amount. Your federal tax balance would then fall to $2,500 owed. If you owed under $7,500, the EV tax credit would wipe that away entirely to a $0 balance, even if it takes care of the tax bill and then some. Presently, purchasing an EV can wipe away tax bills, but it does not put cash directly into your pocket. Keep that in mind if you're someone who typically receives a federal refund when filing taxes.

 

[RickMachE]

If your tax owed, Line 24, is $7,500 or more, you can use all the credit against it.

If the remaining tax owed is greater than zero, and you paid through withholding or estimated taxes more than that, you would get a refund.

Example - tax owed $9,000.
Tax credit of $7,500.
Tax paid via withholding or estimated tax $7,000.

$9,000 - $7,500 = $1,500 - $7,000 = $5,500 refund.

What does non-refundable mean?

Tax owed $3,000.
Tax credit of $7,500 cannot be fully used, you lose $4,500. That $4,500 is non-refundable.
If you also withheld or paid estimated tax of $7,000, you would get all of that back.

 

[RetiredDP]

The California credit is not a tax credit (a rebate?). It is given directly after submitting required information. As I recall it took perhaps a month on the last one I did. And yes, you can get both Federal and state. California rebate will be $2000 (as long as sticker price is not over $60,000, so most Mach-Es)

It's been changed to $1,500. I got the full $1,500 refund, even though I got a $64,900 GTPE, because the $60k limit applies to the MSRP, not the end price of the car with options. The MSRP on a GTPE was $59,900 (the GT price). The GTPE upgrade is a set of OPTIONS, and isn't added to the MSRP.

 

[Eraser]

LOL; I'm not saying how she's related to me. The reference to line 16 was in the first post on this thread:

I'm not sure where I got the reference to line 16, since I made that post long ago. I've updated that reference to clear up the confusion.

https://www.policygenius.com/taxes/guide-to-form-1040/#how-to-fill-out-form-1040-line-by-line

 

[Eraser]

Whats also so confusing is just how unclear this all is.. This is just one of MANY articles I've read trying to decipher this:
https://www.cnet.com/roadshow/news/ev-tax-credit-biden-bill-senate/

Technically that is true, they don't just cut you a check for $7,500 tax credit. Long story short, if you've over paid your taxes after factoring in the tax credit they would "cut you a check" for the overage. It could actually be more or less than that amount.

If you use Turbo Tax you can play around with your filing from the prior year to see how it would have impacted your tax situation. Assuming not much has changed from last year to this year, should give you an idea of what you can expect.

 

[dbsb3233]

If your tax owed, Line 24, is $7,500 or more, you can use all the credit against it.

If the remaining tax owed is greater than zero, and you paid through withholding or estimated taxes more than that, you would get a refund.

Example - tax owed $9,000.
Tax credit of $7,500.
Tax paid via withholding or estimated tax $7,000.

$9,000 - $7,500 = $1,500 - $7,000 = $5,500 refund.

What does non-refundable mean?

Tax owed $3,000.
Tax credit of $7,500 cannot be fully used, you lose $4,500. That $4,500 is non-refundable.
If you also withheld or paid estimated tax of $7,000, you would get all of that back.

And to be a bit more clear, I'd replace the word "owed" with "total tax". Some might still confuse the word "owed" with what they might still owe as a balance when filing their tax return. When of course it has nothing to do with how much was withheld or paid in, only what the total tax amount is.

 

[Xlch59]

It's been changed to $1,500. I got the full $1,500 refund, even though I got a $64,900 GTPE, because the $60k limit applies to the MSRP, not the end price of the car with options. The MSRP on a GTPE was $59,900 (the GT price). The GTPE upgrade is a set of OPTIONS, and isn't added to the MSRP.

There is also a $2000 rebate the the Mach E is eligible for. It takes awhile to get the check but it's $2000.
cleanvehiclerebate.org

 

[Lathrop]

Tax rebate question. On my sale document is a line for Tax Computation "Less manufacturer's rebate assigned to dealer at time of sale..... $7600". Any opinions on if this anything to do with the Federal Tax credit of $7500? I don't live in the tax state of CA!

 

[timbop]

Tax rebate question. On my sale document is a line for Tax Computation "Less manufacturer's rebate assigned to dealer at time of sale..... $7600". Any opinions on if this anything to do with the Federal Tax credit of $7500? I don't live in the tax state of CA!

The way you've worded it there it sounds like the Wyoming State tax for the sale of the car, but that is insanely high if it is. Maybe attach a photo of the form so there's some context to the information

 

[peoples1234]

Tax rebate question. On my sale document is a line for Tax Computation "Less manufacturer's rebate assigned to dealer at time of sale..... $7600". Any opinions on if this anything to do with the Federal Tax credit of $7500? I don't live in the tax state of CA!

Did you buy a dealer demo? In certain states, where demos had to be registered, Ford incentivized buyer at the time of purchase because they were ineligible for the federal tax credit. The $7600 sounds like $100 for the driver assist cash plus the $7500.

 

[timbop]

Did you buy a dealer demo? In certain states, where demos had to be registered, Ford incentivized buyer at the time of purchase because they were ineligible for the federal tax credit. The $7600 sounds like $100 for the driver assist cash plus the $7500.

ahhh, that sounds plausible

 

[Lathrop]

First it is not WY tax on the car. Yes, it was the dealer demo as they swapped out my ordered car with the demo, glad they did as the ordered car finally arrived last week, 10 months after the order I've got a call into the dealer to clarify just what that statement means. I suspect it is not the fed rebate but you never know.

 

[hls811]

You should get a new tax preparer, your current one is not very good. Line 24 is what matters.

A nonrefundable credit essentially means that the credit can't be used to increase your tax refund or to create a tax refund when you wouldn't have already had one. In other words, your savings cannot exceed the amount of tax you owe. That is line 24.

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.

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