How does the $7,500 Federal Tax Credit Work

[JerryBob]

I would like to buy a new Chevy Bolt rather than lease. One of the things holding me back is how the federal tax credit works. It seems simple, like asking how to bake a pie, but depending on who you ask you get a different response. I have heard you get the full amount, and heard you may only get part of it depending on certain criteria. Has anyone actually filled out IRS Form 8936 and completed their taxes with it?

 

[wwhitney]

The EV Tax Credit is a nonrefundable tax credit. So if your income tax is at least $7,500, you will get the full benefit. If your income tax is less, it will reduce your tax liability to 0. Income tax is line 44 plus line 45 if you file form 1040.

Cheers, Wayne

 

[JerryBob]

So if I owe $7,600 in federal income tax (and paid that much in in payroll tax deductions throughout the year) my tax bill will be $100 and the IRS will send me a check for $7,500?

 

[DucRider]

So if I owe $7,600 in federal income tax (and paid that much in in payroll tax deductions throughout the year) my tax bill will be $100 and the IRS will send me a check for $7,500?

Yes.
It would reduce your tax obligation to $100, you would show $7,500 in over payment and would receive that as a refund.

 

[joe]

Someone posted this on another bolt forum. If your tax liability is not at least 7500, you can create a taxable event to increase your tax bill in order to take full advantage of the credit. One example to create such an event is to rollover from a traditional IRA to a Roth, so you pay the tax on the income from the traditional IRA now with the EV credit and won't have to pay tax on that income or its interest later.

 

[DanDietrich]

I will add that I use an accountant for many reasons and got the full $7500 back. Exactly as explained above, it is real,