EV, clean vehicle tax credit
Hello all.
Last year we prepaid around $13000 in estimated tax, at the end of the year we owed $159.
This year we are doing the same. However we just bought an EV and can receive $7500 in tax credit. The dealer has filed form 15400 and we have a copy.
I read this online "The credit is nonrefundable, which means it can lower or eliminate your tax liability, but you won't get any overage of the credit refunded once your liability hits zero" I am trying to understand that. Does that mean I should not pay in advance for estimated taxes for 2025?
Thank you.
Comments
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Thank you for joining our community, Steve.
You are correct, this credit is a nonrefundable credit in that it can reduce your tax liability to zero, but not beyond (creating a refund by itself). The straight answer is it depends on what result you want on your 2025 tax return. Estimated tax payments are taken into account after your tax liability has been settled. Meaning, if you were to pay estimated taxes of $13,000 this year, and buy/apply the clean vehicle tax credit, you could be looking at an IRS refund of $7,500. However, if you wanted to get closer to owing $0, you could pay less in estimated taxes by the expected credit of $7,500.
We publish the 2025 new FreeTaxUSA software sometime in December so that you can make these estimated changes to get a more precise estimate to make the best decision regarding how much you want to prepay your taxes.
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Thank you Cory. At least the decision is either have a $7500 refund or reduce our estimated quarterly payments. I was concerned I would lose that $7500, so all is good.
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