2023 Federal EV Tax Credit

Forum|Forum|3 years ago
March 23, 2023
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I have a question regarding 2023 Federal EV Tax Credit ($7,500) and 2023 Tax Return

The requirements for the Fed'l EV tax credit is located here:

https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after

Aside from income, vehicle and other eligibility requirements, is it also necessary to have federal amounts withheld or paid to exceed the $7,500 tax credit? In other words, I want to make sure that the $7,500 EV tax credit is based on how much Fed taxes were paid for 2023 and not whether I will receive a refund or an amount owing in 2023 (based on my total tax line 24 less total payments on line 33. Form 1040) . Thanks in advance.

Vanessa A

The EV credit is a non-refundable credit. This means, your tax liability on line 16 of your 1040 must be greater than $7,500 in order to receive the full credit. Line 16 is the tax you are liable for based on your taxable income on line 15.

So it is not based on how much was paid. Example, if your tax liability on line 16 is $10,000, you will receive the full credit even if you only had $3,000 withheld. You would end up with a refund of $500 in this situation. (10,000-7,500= $2,500 tax-3,000=$500 refund)

If your tax liability on line 16 was $5,000 and they withheld $5,000, you would get $5,000 back and the extra $2,500 would be lost as it is not refundable and cannot be carried forward for use in future years.

It can also be reduced by other credits that you have. The EV credit flows from Schedule 3 line 6i. This will then show on line 20 of your 1040. So any credits before this credit will reduce your EV credit. Lines 24 and 33 are not relevant to the amount of credit you will get. Line 24 includes the deduction of the EV credit.

Basically, what you pay in, is not relevant. Only your liability is relevant.

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