Usually get refund. How should i prepare for EV credit?

[jazzmanmonty]

Wave 1 order here.. pretty optimistic I'll still qualify for $7500 credit whenever my Lightning comes (people, stop buying MME's! lol). But as stated, i usually get a tax refund at the end of the year. Nothing big...few grand at most. How are you guys preparing or adjusting your withholdings in anticipation for the $7.5k? I'm sure there are more of you that have ordered/plan to order that are in the same boat. Any online calculator tools you use to get things dialed in precisely? I did a google search, but answers are "ask an accountant, or too vague, or calculators designed for California w/additional incentives, or people just speaking Greek. Would be interesting to hear your thoughts or ideas, as it may help others in the same boat.

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[broncoaz]

I’m not going to count my chickens before they hatch. If I get a delivery in time and there is a tax credit I’ll collect a refund check after I file for 2022. I would be displeased if I adjusted and the tax credit somehow didn’t happen.

If I were going to adjust I would go run the calculator at irs.gov, back out the credit, then file a new W-4 form with lower withholding accordingly.

https://apps.irs.gov/app/tax-withholding-estimator/about-you/

 

[shutterbug]

Wave 1 order here.. pretty optimistic I'll still qualify for $7500 credit whenever my Lightning comes (people, stop buying MME's! lol). But as stated, i usually get a tax refund at the end of the year. Nothing big...few grand at most. How are you guys preparing or adjusting your withholdings in anticipation for the $7.5k? I'm sure there are more of you that have ordered/plan to order that are in the same boat. Any online calculator tools you use to get things dialed in precisely? I did a google search, but answers are "ask an accountant, or too vague, or calculators designed for California w/additional incentives, or people just speaking Greek. Would be interesting to hear your thoughts or ideas, as it may help others in the same boat.

Forget about refund and witholding. Look at last year's 1040 line 24. If that number is more than $7,500, you're OK.

 

[adoublee]

Are you wanting to pay in less all year so that you tie up less of your cash across the year and money sent back to you is reduced at tax time? This is risky if you aren't sure you will get the vehicle and credit in 2022 but you can just change your elections number if you are an employee, which will reduce the tax withheld for you. Otherwise, you only need to make sure the "tax owed" line on the form is 7500 or more before the credit to make sure you get the full value of the credit - this is independent of how much you usually pay in or get sent back.

 

[jazzmanmonty]

Are you wanting to pay in less all year so that you tie up less of your cash across the year and money sent back to you is reduced at tax time? This is risky if you aren't sure you will get the vehicle and credit in 2022 but you can just change your elections number if you are an employee, which will reduce the tax withheld for you. Otherwise, you only need to make sure the "tax owed" line on the form is 7500 or more before the credit to make sure you get the full value of the credit - this is independent of how much you usually pay in or get sent back.

Yes, this is pretty much what I'm looking to do... have less federal taxes withheld so that technically I "owe" as close as possible to $7500 come tax time. That way when (if) I get the $7500 EV tax credit, I hit $0, or at least close to it on either side. Many people forget that its non-refundable and think they'll just get a nice refund next year.. ya, not happening unless that failed EV bill comes back to life.

I was thinking the simplest way would just to decrease federal withholding down to $0 and put aside the amount that is currently being withheld, then just pay up the difference that way. But that takes too much financial discipline and don't want to think about it every 2 weeks. So i was looking for some middle ground where there might be a quick formula to find the withholding "sweetspot" so it takes care of itself. Maybe I'm asking for too much lol. I'm not an accountan, and just have a normal middle-class 9-5, so the self-employed route doesn't really cut it for me.

 

[adoublee]

Yes, this is pretty much what I'm looking to do... have less federal taxes withheld so that technically I "owe" as close as possible to $7500 come tax time. That way when (if) I get the $7500 EV tax credit, I hit $0, or at least close to it on either side. Many people forget that its non-refundable and think they'll just get a nice refund next year.. ya, not happening unless that failed EV bill comes back to life.

I was thinking the simplest way would just to decrease federal withholding down to $0 and put aside the amount that is currently being withheld, then just pay up the difference that way. But that takes too much financial discipline and don't want to think about it every 2 weeks. So i was looking for some middle ground where there might be a quick formula to find the withholding "sweetspot" so it takes care of itself. Maybe I'm asking for too much lol. I'm not an accountan, and just have a normal middle-class 9-5, so the self-employed route doesn't really cut it for me.

Just to be clear, the credit is not refundable against tax never owed. However, you can withold to much and still get a fat 7500 "refund" of your pre-payments of tax owed. You just have to have had a minimum of tax liability paid EITHER through withheld funds OR remaining balance at tax time.

 

[SuperClyde]

My wife and I purchased a Volvo XC60 Plugin this year and got the entire $5419 back. This article helped explain it to me.

Intuit - EV credit

 

[RickLightning]

Yes, this is pretty much what I'm looking to do... have less federal taxes withheld so that technically I "owe" as close as possible to $7500 come tax time. That way when (if) I get the $7500 EV tax credit, I hit $0, or at least close to it on either side. Many people forget that its non-refundable and think they'll just get a nice refund next year.. ya, not happening unless that failed EV bill comes back to life.

I was thinking the simplest way would just to decrease federal withholding down to $0 and put aside the amount that is currently being withheld, then just pay up the difference that way. But that takes too much financial discipline and don't want to think about it every 2 weeks. So i was looking for some middle ground where there might be a quick formula to find the withholding "sweetspot" so it takes care of itself. Maybe I'm asking for too much lol. I'm not an accountan, and just have a normal middle-class 9-5, so the self-employed route doesn't really cut it for me.

This is a clear misunderstanding of the tax credit's "non-refundable" nature. Posts #3 and #6 should clarify that. What matters is your tax liability, not how much tax you have withheld or how much you have to pay to the IRS or get back from the IRS. You generate income via wages, interest, dividends, and capital gains. If that tax, line 24, is $7,500 or higher, you'll get the entire tax credit.

 

[Sdctcher]

Shift Future 2023 Income to 2022.

Shift 2022 Expenses (if possible) 2022 to 2023.

Both of these are hard to do for Regular Folks!

For Married Couple No Kids Quick Calculation: $100,000 Gross Income - $25,100 Standard Deduction (Not Itemized) = Adjusted Gross Income of about $75,000 X 10-12% Tax Rate = $8,5000 Tax (so you would get back $7,500 of that IF the law was still in effect OR Congress does not replace it with a Rebate Law (Point-of-Sale)).

How Much you got in Refund tells you Nothing. Look at your 1040 Taxable Income & Taxes Paid on 1040.

Your Best Hope would be that Congress pares down BBB and replaces current Tax Credit with more friendly Rebate/Credit.

There are so many Individual Variables (Itemized, Child Credit, Etc.) any Non-Professional Advice you get may not fit your case. Do Not Assume.

 

[RickLightning]

For Married Couple No Kids Quick Calculation: $100,000 Gross Income - $25,100 Standard Deduction (Not Itemized) = Adjusted Gross Income of about $75,000 X 10-12% Tax Rate = $8,5000 Tax (so you would get back $7,500 of that IF the law was still in effect OR Congress does not replace it with a Rebate Law (Point-of-Sale)).

Correction - all this shows is the tax liability of someone making $100,000. It doesn't address what you'd "get back" because it's not showing "what you paid" in tax withholding or estimated taxes.

What this does show is that someone incurring a tax liability of $8,500 will be able to get utilization of 100% of the $7,500 tax credit.

 

[Nick Gerteis]

You need to have enough income for your “tax owed” to be at least $7500. Your withholdings and your usual refund amount are irrelevant. I don’t earn enough for my tax liability to be $7500, but I plan to “artificially” increase my income by taking a early withdrawal from a 401k. Or I guess I could increase my income by getting on the overtime desired list and work 12 hours a day delivering mail….in the summer time in Mississippi….NOPE!

 

[RickLightning]

You need to have enough income for your “tax owed” to be at least $7500. Your withholdings and your usual refund amount are irrelevant. I don’t earn enough for my tax liability to be $7500, but I plan to “artificially” increase my income by taking a early withdrawal from a 401k. Or I guess I could increase my income by getting on the overtime desired list and work 12 hours a day delivering mail….in the summer time in Mississippi….NOPE!

Assuming you're under 59 1/2, your early withdrawal will cost you 10% in penalties.

A better option, if you have it, would be to convert money from a traditional 401K or traditional IRA to a Roth. The conversion is 100% taxable income. There are no penalties.

I'd point out that the IRA conversion at least can be done on the last trading day of the year, as long as it's done early enough in the day. I sat down on 12/31/21, looked at the distributions of my mutual funds in my taxable account, estimated the ones that wouldn't post until 1/3 but happened on 12/31, and then converted a bit over the needed amount. We'll see how close I came when I do my taxes in mid-February after my brokerage tax paperwork shows up.

 

[webspoke]

Same as the OPs question, but just to clarify the last couple of explanations. If my total tax liablilty for the year was 10k, and I have withheld 5k during the year. With a 7.5k tax credit, does my calculation look like this and I get a refund?

refund (10-5-7.5) = 2.5

 

[Maquis]

Same as the OPs question, but just to clarify the last couple of explanations. If my total tax liablilty for the year was 10k, and I have withheld 5k during the year. With a 7.5k tax credit, does my calculation look like this and I get a refund?

refund (10-5-7.5) = 2.5

Withholding and refund are irrelevant to the tax credit.

But the answer to your question is ”yes”..

 

[LightningShow]

You need to have enough income for your “tax owed” to be at least $7500. Your withholdings and your usual refund amount are irrelevant. I don’t earn enough for my tax liability to be $7500, but I plan to “artificially” increase my income by taking a early withdrawal from a 401k. Or I guess I could increase my income by getting on the overtime desired list and work 12 hours a day delivering mail….in the summer time in Mississippi….NOPE!

You can have some of my tax bill, I have plenty for both of us.

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