Tax credit question

Chevy Bolt EV Forum

Help Support Chevy Bolt EV Forum:

This site may earn a commission from merchant affiliate links, including eBay, Amazon, and others.
Status
Not open for further replies.

Moleman

New member
Joined
May 26, 2017
Messages
4
Hi folks. Despite everything I've read about the $7500 federal tax credit, there's still something I'm not clear on, and I'm hoping someone who has actually done it can answer.

What I'm not clear on is if "taxes owed" includes withholding or not. For example, let's say my total income tax due is $10,000. I have had $5000 withheld throughout the year, so I would usually have to write a check for $5000 more. Obviously with the $7500 credit I owe nothing, but do I get a refund check for the extra $2500 that was withheld from my paychecks?

Thanks in advance for any help.
 
Check with an accountant.... This is an easy question. don't be cheap or lazy.... It is worth having an accountant do your taxes this year..... to get it right....
 
Moleman said:
For example, let's say my total income tax due is $10,000. I have had $5000 withheld throughout the year, so I would usually have to write a check for $5000 more. Obviously with the $7500 credit I owe nothing, but do I get a refund check for the extra $2500 that was withheld from my paychecks?
Yes.

Cheers, Wayne
 
Sweet! That's good to know - I was going to have to add 20 dependents or so to owe $7500 by year's end!
 
I hope your example was hypothetical. If you only had half of your tax liability withheld during the year you would owe the additional tax and a penalty for having insufficient contributions during the year.

But the good news is the $7500 tax credit applies to your total tax liability. Not just the withholding. I received the entire $7500 tax credit in my 2016 taxes and will be buying another new EV and applying for it again in 2017.
 
I would agree with consulting with a tax consultant. Wouldnt want to risk a few grand over a technicality.
 
elpwr said:
I hope your example was hypothetical. If you only had half of your tax liability withheld during the year you would owe the additional tax and a penalty for having insufficient contributions during the year.

But the good news is the $7500 tax credit applies to your total tax liability. Not just the withholding. I received the entire $7500 tax credit in my 2016 taxes and will be buying another new EV and applying for it again in 2017.


If he has a $10,000 tax liability not accounting for an EV purchase, has $5000 withheld and purchases an EV as late as 12/31 he over-withheld and no penalty would be due. You don't have to wait for a $7500 refund check, you can adjust withholding to account for the $7500 reduction in tax liability for the year.
 
sparkyps said:
elpwr said:
I hope your example was hypothetical. If you only had half of your tax liability withheld during the year you would owe the additional tax and a penalty for having insufficient contributions during the year.

But the good news is the $7500 tax credit applies to your total tax liability. Not just the withholding. I received the entire $7500 tax credit in my 2016 taxes and will be buying another new EV and applying for it again in 2017.


If he has a $10,000 tax liability not accounting for an EV purchase, has $5000 withheld and purchases an EV as late as 12/31 he over-withheld and no penalty would be due. You don't have to wait for a $7500 refund check, you can adjust withholding to account for the $7500 reduction in tax liability for the year.


True. But that's not the scenario he outlined. He stated $10k liability and $5k withheld - then writing a $5k check. He would owe a penalty on this because only half of his tax liability was withheld.
 
elpwr said:
True. But that's not the scenario he outlined. He stated $10k liability and $5k withheld - then writing a $5k check. He would owe a penalty on this because only half of his tax liability was withheld.
OK, so I'm Canadian and obviously I have no familiarity with the US tax system. But this seems a little draconian to me, given the fact that financial circumstances can change throughout the year.

In Canada, if you underpay your taxes by more than a certain amount (I believe it's currently $3,000) there's no penalty (assuming of course that you pay the balance when you file your return) - BUT you do become obligated to pay quarterly tax installments in the subsequent year. Does it not work like this in the US?
 
The US rules, as I recall them: To avoid paying an estimated tax penalty, you need to do one of two things:

1) Pay tax during the year of at least 90% of the tax due. (I think the threshold is independent of income.)
2) Pay tax during the year of at least 100% of the previous year's tax due (rises to I believe 110% for higher income people).

Cheers, Wayne
 
wwhitney said:
The US rules, as I recall them: To avoid paying an estimated tax penalty, you need to do one of two things:

1) Pay tax during the year of at least 90% of the tax due. (I think the threshold is independent of income.)
2) Pay tax during the year of at least 100% of the previous year's tax due (rises to I believe 110% for higher income people).

Cheers, Wayne

Close....
3) Owe less than $1000 after estimated tax/withholding is deducted from the tax bill.

I believe it's the 3rd one that comes into play for most average people. There's are also an exception if the underpayment being due to a death, disaster, or disability "and not willful neglect".
 
elpwr said:
sparkyps said:
elpwr said:
I hope your example was hypothetical. If you only had half of your tax liability withheld during the year you would owe the additional tax and a penalty for having insufficient contributions during the year.

But the good news is the $7500 tax credit applies to your total tax liability. Not just the withholding. I received the entire $7500 tax credit in my 2016 taxes and will be buying another new EV and applying for it again in 2017.


If he has a $10,000 tax liability not accounting for an EV purchase, has $5000 withheld and purchases an EV as late as 12/31 he over-withheld and no penalty would be due. You don't have to wait for a $7500 refund check, you can adjust withholding to account for the $7500 reduction in tax liability for the year.


True. But that's not the scenario he outlined. He stated $10k liability and $5k withheld - then writing a $5k check. He would owe a penalty on this because only half of his tax liability was withheld.

That is the scenario he outlined:

"Obviously with the $7500 credit I owe nothing, but do I get a refund check for the extra $2500 that was withheld from my paychecks?"

If he gets a $2500 refund with the $7500 tax credit then he over-withheld and no penalty is owed.
 
This topic has been beaten to death. If OP would like more info, please start a new thread. Thx.
 
Status
Not open for further replies.
Back
Top