I usually owe. Penalties were negligible back in the low interest rate days

 

This is a decent strategy.
It shows more knowledge than those who have no understanding of withholdings and if they see 50% withholdings they think the govt is taxing them 50%.

But other than child tax rebates (whi h is refundable) , other rebates ie. EV or solar roof are not refundable. So if IRS gives you 1k back on returns and you have 1 kid, you still get 2k for the kid and 3k back total.

Meaning if you owe 7.5k in taxes at the end of the year you bought an elidgale EV, that 7.5k rebate you got evens you out.

If they owe you even 1$, your 7.5k rebate is forfeit.

If you know what you are doing (which the OP clearly needs to hire a tax expert), you can claim enough on your w4 to owe what you plan on getting a rebate for to close to even you out.

Or IF you got at least 1$ back last year, you can claim withholdings exempt, and possibly end up with a 30k tax bill which can be covered by the 100k purchase of a massive solar facility/roof (30% rebate=30k). And reap rewards of free electricity next 20+ years and some back from the grid enjoying that 30% discount lowering your payback/profit/break even period.

But probably not be able to claim withholding except next year though.

The goal should be to owe just enough not to be penalized, not just $0. Which depends on a lot of factors but mainly previous year's w2.

And we all make enough here to way overshoot (minimize witholdings) and re-adjust in October or November and withold 100% for the last 2-3 months if you solar project fell through or whatever reason you aren't going to get a rebate anymore and don't want to get penalized.

Which also requires discipline and financial savvy (i.e not living paycheck to paycheck or depending on premium and being able to afford living with 0 paychecks for 3 months.) Basically do your own withholdings (as much as the govt would withold) even putting it in a low int savings account would be better off than letting the govt withold it and then calculate how much to withold those last few paychecks to avoid a penalty.

If you know you aren't going to qualify for any non-refundable rebates, than yes, 0 is best. But things come up, I think it's better to have some in the neg earlier in the year to get the benefit of a rebate should one come up, and work back to 0 if you need or at least work to under penalty.

Disclaimer: I'm far from a tax expert, but feel I know enough from basic google searches to use things to my advantage which hasn't resulted in an audit or penalties yet. Use with caution, YMMV
I'm sure there are way smarter people than me on this that can correct me and i can learn from.

 

This is incorrect.

non-refundable credits reduce your tax liability still. Just because the big number on TurboTax is a green $1 refund before the EV credit, doesn’t mean you won’t get $7500.
The credit reduces your liability by $7500 until your liability would be $0.

In your example, if someone is earning something like $100k+ per year, they’re probably paying more than $7.5k in taxes that year (because their marginal tax rate is higher than 7.5%). You don’t have to try to owe $7.5k at the end of the year to get the credit.

Most low mid to high earners will get the full $7.5k back if they don’t exceed the credit income threshold.

source: I’m not a tax professional but I bought an EV

unless this is what you meant…. Tax discussions can get very confusing because it requires very precise language.

 

yeah, what he wrote didnt sound right

 

I did read that wrong. Thanks for clarification. I was reading "how much you owe" as how much you pay at the end of the year, not how much you owe based on liability regardless of how much you witheld.

You are right, precise language is critical. I interpreted that word "owe" wrong so many different sources trying to learn things.

So it does seem like 0 is the best way.

Sorry about that. I would edit it out if I could. You just saved me a bunch of unnecessary hoops to jump through that I have been doing, thanks.

Clearly I could benefit from tax pro.

So basically if I understand the refundable tax credit are good for those who make no income and have 0 tax liability. They still wouls get a refundable rebate, but would not get the EV non-refundable rebate correct?

Those with no or low liability have nothing owed. And those with high liability owe a percent based off of bracket, and if you make 66k (after deductions) that will owe about 7500 (7479 if i calculate 2023 bracket correctly) in which if you had nothing witheld and used an EV credit, you would be at 0 when you file. Or if you had 7500 witheld from 'proper w4' you would get back about 7.5k from IRS after filing due to the EV credit, making your still at 0, but the IRS received an interest free loan for 7500 all year long and longer if you wait to file in April.

I guess thats how we learn. Take a hit to the pride and keep on learning.

 

Yep, your interpretation is correct now. Different credits have different rules, so either reading very carefully or using a tax professional (second is way better when you can afford it) is smart.
There’s all kinds of implications for doing certain things with taxes, and relying on credits or incomplete interpretations can lead to penalties… definitely over-complicated… but such is government.

I also can’t pretend to know everything because I don’t get paid to do that.

 

Welcome to the world of “paying your fair share”. Our Tax law punish those who work. If you don’t know that, you are not going to like your future.

it also seems, because you are surprised by this tax bill, that you need professional tax planning help. I got hit with an $80K tax bill last year. Yeah, that sucked. But it was 3 things that came together and luckily I was prepared. I now have a CPA and a TaX Attorney. They both said my last years tax surprise was not avoidable, but having them now I know it is coming.

when you are getting a big “retro” check and selling a house… prepare to pay big. No, if you buy another house it is not tax free. It is capped around half a mil. But even with that, the big gotcha no one gets, they still add the gain to your AGI. Which raised the tax rate on your other earning.

taxes are a *****.

 

you had that much of a profit on your house? How did you “work” for that?

 

Not if you are way underwithheld and the IRS slaps you with penalties for not paying quarterlies.

 

you dont want to underpay and owe.

If you fall under safeharbor rules, then you won't owe underpayment penalties and interest in addition to the tax owed.

You wont get charged underpayment if you don't owe more than $1000.

If you owe more than $1000, then if you paid at least 90% of the tax owed this year or you paid 100% (110% if your AGI is over $150k) of what you owed last year you wont face underpayment penalties

https://www.hrblock.com/tax-center/i...t-tax-penalty/