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Looking at the relevant draft US federal tax forms for 2023 (Schedule 3 and Schedule 8812), they appear to mirror 2022.

Consider a taxpayer who in 2023 takes delivery of an EV that qualifies for the full $7500 clean vehicle credit. For the Child Tax Credit (nonrefundable), they have 3 eligible children, and let’s say they owe $8500 in tax (line 18, form 1040).

The $7500 Clean Vehicle Credit (line 6f of Schedule 3) gets transferred into 8812 Credit Limit Worksheet A, where it gets subtracted from the tax owed ($8500 - $7500 = $1000). $1000 becomes the amount of CTC the taxpayer can claim.

This works for the taxpayer’s benefit, because the $5000 portion of the CTC that was limited becomes the starting point for figuring the Additional Child Tax Credit (refundable). In this case, the taxpayer could claim $4800 in refundable credits (3 x $1600). In total the taxpayer can use $13,300 of credits.

I see that draft tax forms typically are not finalized until January. Is it possible that the relationship of the tax credits could change between now and then based purely on IRS/Treasury decisions, or is this arrangement codified by law requiring Congress to change it? (Or if my calculations or interpretation of the credits is faulty, I’m certainly interested to know that too.)

I'm asking because not all of the non-refundable credits on Schedule 3 are taken into account on Credit Limit Worksheet A. Those credits that are not, then limit or eliminate the taxpayer’s ability to claim the refundable ACTC.

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  • This is a legal question. Or a question about how the political system works. Either puts it off topic here. But the brief answer is: a draft is only a draft, and laws can be changed the same way they were made; there are no guarantees and all you can do is try to find someone you trust to vote for.
    – keshlam
    Nov 11, 2023 at 13:39
  • IRS certainly doesn't routinely or consistently hold forms (and schedules) or instructions until Jan, although I have seen them do specific ones when a relevant bill has been proposed. If a change happens afterwards, they issue an update -- sometimes even after people have filed. For this case, for the last 4 years (TY 2019-2022) schedule 8812 was released Dec 5, Nov 20, Dec 13, Nov 7 and the instructions were Jan 15, Nov 19 then updated Jan 13 (for the option to use prior-year income), Jan 7 (2021 had the 1-year fully-refundable and half-advanced CTC), Dec 8. Nov 15, 2023 at 6:27

2 Answers 2

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I see that draft tax forms typically are not finalized until January. Is it possible that the relationship of the tax credits could change between now and then, or is this arrangement codified by law?

Remember that the law is created by Congress and signed by the president. At any time they can modify the law. They have done it early in the year, late in the year, and even after the tax year is over.

Because of possibility of late in the year changes, the IRS waits until January to finalize the forms.

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    Is it then reasonable to assume that unless there were new laws specifically pertaining to the CTC/ACTC or the Clean Vehicle Credit, that the current logic in the tax forms will not change? Another way of asking my question would be to ask if the relationship between these credits was established by law (Congress/President) or by regulation (set by IRS/Treasury, and potentially more easily modified).
    – sr-mh
    Oct 13, 2023 at 1:58
  • It's reasonable to expect... But last-minute compromises to get other legislation resolved are always possible, and of course a president could veto and reopen the question.
    – keshlam
    Nov 11, 2023 at 16:33
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If you're asking whether nonrefundable credits should be deducted from the tax liability before or after it is reduced by the refundable credits, then yes - it is codified by law that they'd be deducted before the refundable credits. See the IRC Sec. 26.

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  • My question is one step beyond that: It appears that some nonrefundable credits (Schedule 3: lines 5a, 6a, 6b, 6c, 6e, 6g, 6h, 6i, 6j, 6k, and 6z) would not “limit” the CTC, thereby reducing or eliminating the nonrefundable ACTC (see the logic in Sch. 8812, lines 13, 14, and 16a). The clean vehicle credit (line 6f) does limit the CTC, which is good. I’m wondering if this limiting characteristic is likely to change between now and when the forms are finalized.
    – sr-mh
    Oct 13, 2023 at 1:47
  • All you can do is use your best understanding now and your best judgement of what changes may or may not occur before April. There are no guarantees.
    – keshlam
    Nov 11, 2023 at 16:35

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