I'm considering buying a new electric vehicle which would qualify for the US Federal Clean Vehicle Tax Credit.
In theory, I could be eligible for up to a $7500 tax credit.
My current paycheck tax witholdings usually result in an annual tax refund. I'd prefer to leave my paycheck withholding rate as it is.
I'm curious though: I have a traditional IRA. I understand that if I withdraw early from that (before age 59.5) the amount of money I withdraw would be subject to taxes and a 10% early withdrawal penalty.
My question: Can a non-refundable tax credit in the united states be used to negate the taxes/penalties owed from an early withdrawl of traditional IRA? Or do penalties need to be paid back regardless of whether or not someone has available credits?