If I transferred EV Credit to Dealer, how see IRA withdrawal as essentially tax free?
In 2024, I transferred a $7500 EV Credit to a Tesla Dealer. Now I want to effectively 'use' that credit to effect a tax free withdrawal from an IRA. I am 70, so not subject yet to RMD. My income, Married-Filing Jointly, is less than half of $300,000. The Tesla car is eligible for the full $7500 Federal Clean Vehicle Tax Credit (non-refundable).
- Do I withdraw from my IRA an amount such that in my marginal tax bracket(22%), the tax would be $7500?
- Can I see that tax amount due to the IRA withdrawal before I file taxes AND before Dec 31, 2024 in FreeTaxUSA software, or do I manually calculate it?
I realize that I do not have to refund the difference even if my tax liability is less than the credit ($7500)
Answers
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Hello! Thank you for contacting the FreeTAXUSA Community. The $7500 EV Credit is an Inflation Reduction Act not an Individual Retirement Account. This is simply an increased Electric Vehicle Credit. By transferring the credit to your car dealership, it allows you to reduce the price of the vehicle being purchased. Here is a link to the IRS for additional information: (https://www.irs.gov/newsroom/topic-h-frequently-asked-questions-about-transfer-of-new-clean-vehicle-credit-and-previously-owned-clean-vehicles-credit#:~:text=The%20transfer%20election%20allows%20a,due%20from%20buyer)%20from%20the)
You will need to enter the credit on your return within the Clean Vehicle Credit section. The IRS requires you to enter your vehicle information even if you transferred the credit to the dealership because there are scenarios where you may have to repay the credit, like being over the Adjusted Gross Income limit for the credit in 2024 and 2023.
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"The $7500 EV Credit is an Inflation Reduction Act not an Individual Retirement Account. " Clearly.
I don't believe that the intent of my question was understood.
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I apologize for misunderstanding your question.
You will need to enter the withdrawal from your Individual Retirement Account within the software. The software will calculate the tax if any on the withdrawal. You should receive a 1099-R from the issuer of your Retirement Account.
The credit from the Tesla Dealership will have no effect on an Individual Retirement Account withdrawal. The credit is simply applied as a reduction to the purchase of your vehicle.
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I believe the answer to Question 1 is yes. Some one please correct me if I am wrong.
Where in FreeTaxUSA do I see the tax due solely to the IRA withdrawal? (Question 2)?
