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Old 08-20-2015, 04:58 PM
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Join Date: Aug 2015
Posts: 2
Vehicle tax credit (and order that credits are applied)

My question is about the vehicle tax credit specifically, but can be answered by laying out the general order that credits and withholdings are applied to the tax liability. For instance:

Assume these totally fictional numbers -

Tax liability = 10,000
Child credit = 2,000
Vehicle credit = 7,500
Tax withholdings = 10,000

What is the order that credits and payments are applied? Would it look like this:

10,000 (tax owed)
-9,500 (total credits)
500 (tax liability)
-10,000 (withholdings)
-9,500 (refund)

Since the vehicle credit is nonrefundable, it makes a huge difference if it is applied first or last. If first, that means a $9,500 refund; if last, no refund.

Any help?



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Old 08-21-2015, 01:37 AM
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Join Date: Oct 2010
Posts: 4,836
Quote:
Originally Posted by mikejedi View Post
My question is about the vehicle tax credit specifically, but can be answered by laying out the general order that credits and withholdings are applied to the tax liability. For instance:

Assume these totally fictional numbers -

Tax liability = 10,000
Child credit = 2,000
Vehicle credit = 7,500
Tax withholdings = 10,000

What is the order that credits and payments are applied? Would it look like this:

10,000 (tax owed)
-9,500 (total credits)
500 (tax liability)
-10,000 (withholdings)
-9,500 (refund)

Since the vehicle credit is nonrefundable, it makes a huge difference if it is applied first or last. If first, that means a $9,500 refund; if last, no refund.
You need to check it form1040 of 2014 instructions/form1040;actually, line 61 of 1040 is the one that tells you your federal tax liability;so $10K is reported on line 56 & 63(UNLESS there is any amount reported between 57 &62) and CTC of $2K was already deducted as it is reported in line 52 also, in line 54 ; $10K of fed tax liability is the amount after $9.5K, then since he amount reported on 1040 line ;as the amount in line 64 and 74 is $10K, the amount in line 75 and 78 is $0, YOU neither owe more, nor get a refund.



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Old 08-21-2015, 08:52 AM
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Join Date: Aug 2015
Posts: 2
Just looked at the form (duh, should have thought of that sooner), and I'm not following what you're saying. Line 61 does not tell me my tax liability, but rather line 63 does. However, that isn't calculated until all credits are applied! So actually line 44 is the initial tax amount, less all credits gives you the line 63 amount.

After all of that is settled, which in my case left me with a total tax amount of -0-, you subtract the total tax withholdings. Since my tax is now -0-, I would be refunded the entire amount that was withheld, like in my first example.

Thanks for pointing me in the right direction!

PS - the problem with your calculation is that you assumed my tax liability was still 10k *after* the deduction of the 9.5k, but that isn't the case. In fact, my credits would actually reduce my tax liability to -0-, leaving me a refund of whatever I paid during the year.



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Old 08-21-2015, 01:17 PM
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Join Date: Oct 2010
Posts: 4,836
Quote:
Originally Posted by mikejedi View Post
Just looked at the form (duh, should have thought of that sooner), and I'm not following what you're saying. Line 61 does not tell me my tax liability, but rather line 63 does. However, that isn't calculated until all credits are applied! So actually line 44 is the initial tax amount, less all credits gives you the line 63 amount.

After all of that is settled, which in my case left me with a total tax amount of -0-, you subtract the total tax withholdings. Since my tax is now -0-, I would be refunded the entire amount that was withheld, like in my first example.

Thanks for pointing me in the right direction!

PS - the problem with your calculation is that you assumed my tax liability was still 10k *after* the deduction of the 9.5k, but that isn't the case. In fact, my credits would actually reduce my tax liability to -0-, leaving me a refund of whatever I paid during the year.
Just looked at the form (duh, should have thought of that sooner), and I'm not following what you're saying. Line 61 does not tell me my tax liability, but rather line 63 does. However, that isn't calculated until all credits are applied! amount.=======>>Sorry right my bad not line 61 but line 63.


So actually line 44 is the initial tax amount, less all credits gives you the line 63 applied===>Correct. The amount reported in line 44 is the tax amount after personal exempt and either std deduction or itemized dedcutions on Sch A ,whichever is larger but before the subtractions of both CTC and vehicle credit.So, the amount in 56 is tax after subtractions of both CTC and vehicle credit.Actually, the amount reported in line 63 is the one that tells you your tax liability. So as said if you mean your net tax liability in line 63 is $10K and the amount reported in line 64 is ALSO $10K, then as said, as the amount in line 64 and 74 is $10K, the amount in line 75 and 78 is $0, YOU neither owe more, nor get a refund.HOWEVER, aslongas you assume that amount reported in line 44 & 47 is $10K( as I assume you have no AMT in line 45), then, the result’d be $500 in line 55 & 63; $2k in line 52; $7.5K in line 54 so the amount in line 55 is $9.5K and $500 in line 56 and also $10K reported in line 64 and 74; finally, you report $9.5K in line 75 & 76. So as mentioned previously you CAN follow the f 1040/ instructions.
Please visit the Website here for refund; https://sa.www4.irs.gov/irfof/lang/e...fgetstatus.jsp


After all of that is settled, which in my case left me with a total tax amount of -0-, you subtract the total tax withholdings. Since my tax is now -0-, I would be refunded the entire amount that was withheld, like in my first example.=========it depends; in this case as mentioned previously, YOU neither owe more, nor get a refund since your balance is $0.You’d be refunded ONLY when the amount in line 74( your total tax withholdings) is more than line 63( your tax liability) However, if you assume the amount reported in line 44 & 47 is $10K, then, the result’d be $500 in line 55 & 63 and also $10K reported in line 64 and 74; finally, you report $9.5K in line 75 & 76.So in this case , you’d be refunded $9.5K from the IRS.

PS - the problem with your calculation is that you assumed my tax liability was still 10k *after* the deduction of the 9.5k, but that isn't the case. In fact, my credits would actually reduce my tax liability to -0-, leaving me a refund of whatever I paid during the year====>Ok I see please read above. I gave you two situations;



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