$7500 tax credit for some EVs

In My Humble Opinion
1

This is a credit against your taxes. I realize many EVs no longer qualify or it’s a reduced figure. It doesn’t carry over year to year. What line on the 1040 represents the figure the $7500 is offset against?

The wife and I pay more than $7500 (+) but with deductions and withholding we usually come out around zero additional to send in.

I can play with my minimum required withdrawal from my IRA at the end of the year; take a percentage that would leave a $7500 liability. Would that be the way to go? In your humble opinion. Thanks

2

This is factual.

This isn’t.

Moved from FQ to IMHO. Any factual information, especially regarding the first part, is of course still welcome.

3

1040, 1040-SR, or 1040-NR, line 18, but from that amount you need to subtract any other personal credits you may be taking, which is from the 1040 lines 1 through 4, 6d, 6e, and 6I; and Form 5695, line 30.

That is all taken from the pdfs at https://apps.irs.gov/app/picklist/list/formsPublications.html;jsessionid=49XzmnT_Si5w7Jn5td5flAh0.20?value=8936&criteria=formNumber&submitSearch=Find (if that doesn’t work, it’s IRS form 8936).

In normal speak, your total tax liability needs to be over $7500 to take get the full credit. If you’ve been having taxes deducted from you paycheck, then you might not owe anything in April, or even be getting a rebate, and have still paid over $7500 in taxes.

In order to get the full credit, I needed to owe more taxes the year I got my EV. I recharacterized a traditional IRA to a Roth IRA, which caused me to pay taxes on it, and also realized some capital gains by selling and immediately rebuying some mutual funds.

If you are expecting the EV credit, then certainly don’t do anything that lowers the total tax you pay for the year below $7500 (or whatever your car qualifies for).

4

It’s too bad they didn’t make this one a carryover credit….

5

I’ll go with the mandatory IRA takeout and limiting any withholding to have a $7500 tax bill.

IF I CAN FIND A DAMN EV I CAN TEST DRIVE AND NOT PAY OVER MSRP!! Sorry for yelling, just upset with the whole chip shortage and EV production ramp up.

6

I’m unsure what you mean by “limiting any withholdings.”

If withholdings are the amount held back from your IRA distribution or paycheck that is paid as taxes, then that’s still money your paying in taxes, and still counts towards what can be offset by the EV credit.

If by withholdings you mean money you’re paying into an IRA, and so lowering your taxes for the year, then it is different.

If you do allow your normal withholdings to happen, and then end up with a big EV credit, you’ll get a big tax refund. Sure, it’s an interest free loan to the government, but otherwise not that big of a problem.

If you do not allow your normal withholdings, and then do not get a big EV credit, then you may be in trouble or have penalties.

Also, the EV credit applies for the calendar year the car is delivered. That can be pretty important if you’re planning on delaying a quarterly tax payments or adjusting your W4.

If you’re talking about withholdings as money paid into an IRA, so tax deferred, then my recommendation is set the money aside, and figure out what to do with it after you buy the car, because getting the car in 2022 or 2023 will change which tax year the credit is for.

So, if the car is delivered in 2022, then take the money your were going to put in an IRA, and use it for something else. If the car ends up delivered in 2023, then you still have time to use the money in a 2022 IRA, because you can do that until the tax deadline in April

7

I’m speaking of the required minimum withdrawal from a taxable IRA. Based on my age [geezerhood] and amount in the account, I have to take a minimum amount out each year. The broker does the work and gives me the figure. I could have this deposited to me monthly or take it at the start/end of the year [preferred so I can adjust taxes due]. I might have a $9000 tax bill on the withdrawal. I can have, say, $1500 taken out leaving me a $7500 bill - offset by the tax credit. This would occur at the end of the year in which I receive the car.

8

Yeah, that’s what I thought you meant—the required minimum distribution. Obviously balancing things so come April you owe $7500, and then that is offset by the EV credit is optimal. You get to keep you’re money the whole time, and don’t have to write a big check, either.

Doing the distribution at the end of the year is best, too, because then you’ll know if you have the car, and how much of a credit it will give you.

There may also be a federal tax credits on installing a charger, plus state and utility credits on the car and charger installation.