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I am looking at buying an EV. According to the dealer, there is a $7,500 tax credit. I've read many other questions on here, such as this, and some articles, but am confused what exactly that will mean when it comes time to pay taxes in April.

By my estimates, $15,000 will have been sent to the IRS from out of my paychecks by the end of 2024 year, but expect I will owe the IRS $2,000 at the time of filing. So my total owed taxes will be about $17,000.

Suppose I buy an EV in 2024 and file taxes for that year in April 2025. Does that mean I only owe $9,500 and should instead get a $5,500 refund?

Some articles I read said the answer is no, I wouldn't see any check from the IRS. So I'm confused where the benefit comes to me. Is that worth $7500 to me, or some amount much smaller, like I don't have to pay taxes on the top $7,500 of my income?

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  • Can you provide any context about the articles that said you would not get a refund?
    – Hart CO
    Commented Oct 19 at 15:49

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https://www.taxpayeradvocate.irs.gov/news/nta-blog/electric-vehicle-tax-credits-issues-and-pitfalls/2024/06/#:~:text=Although%20the%20credit%20is%20not,your%20tax%20liability%20or%20%247%2C500.

The National Taxpayer Advocate Blog--an IRS website--in the article at the above link, immediately states that the tax credit is good for up to $7500.

Receiving the full amount depends on several factors:

  1. New car, not used (if used the possible full amount is $4000)
  2. Battery parts and critical minerals used
  3. Manufacturer's Suggested Retail Price (MSRP) (ex. new car, <$55k)
  4. Your modified adjusted gross income (MAGI) (ex. single filer, <$150k)

If these requirements are met, and your tax liability is greater than zero (0), the credit will reduce your liability to zero, but whatever is not needed will not be refunded to you. As Kevin pointed out in a comment, if the credit reduces your tax liability to less than you've already paid to the IRS, you will get a refund.

You can transfer the credit to the dealer who will then reduce the down payment and fill out the paperwork, but if you end up not qualifying for the full amount, you may have to pay back part of the credit.

Many more details are available in the blog post.

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    Note that, while it cannot reduce your tax liability below zero, it absolutely can reduce your tax liability below whatever number is on your W-4, meaning it could cause you to receive a tax refund when you would otherwise get no refund or owe the IRS.
    – Kevin
    Commented Oct 20 at 17:45
  • @Kevin That's a great point. Thank you. I've tried to incorporate your comment into my answer.
    – mkennedy
    Commented Oct 21 at 20:07
  • So, if in April, I owe $12,000 in taxes, paid all of it already out of monthly paycheck deductions, I should get a check back from the IRS for $7,500?
    – Village
    Commented Nov 2 at 22:40

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