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Increase tax liablity in order to benefit from federal credit?

I considering purchasing a MS after I receive a mid-year bonus.

However, I typically receive approximately ~$4500 as a federal tax refund each year. Thus, if I understand the $7,500 federal tax credit correctly, I'd derive no benefit.

So it would seem that I need to increase my tax liability by about $12K this year in order to make full use of the credit. I'm sure others have faced this... how have you dealt with it?

I'm considering talking to my employer's accounting folks to see if they would issue me the bonus without with-holding as much federal tax... then I would just go ahead and use the credit to offset that.

Thoughts or recommendations?

Thanks.

-sc

The refund you get is a netted figure, not relevant. The only one to pay attention to is the total tax paid and payable. If that >=$7500, then the credit just adds to your refund.

+1 Brian

If you are getting a refund now you'll just be getting $7500 more.

The $7500 tax credit is a non-refundable credit that is applied to offsetting your tax liability in the year you put the car in service. Your withholding is not a factor with respect to the credit. In my own personal circumstance, my S was delivered on Dec. 23. On Dec 27 I pulled $20K from my deductible IRA to insure I had enough tax liability in 2012 for the whole $7500 to offset. It's a use it or lose it credit and cannot be carried forward or backwards to other tax years. Also, because it is a non-refundable credit, if your tax liability is less than $7500, the credit will only offset that lesser figure. They don't pay you the difference.

Steven;
People seem to get confused by the word "liability". In reality, it refers to your entire tax bill, prior to any payments you make or withholding, etc. Some think it refers to the unpaid remainder, but that is irrelevant.

My bad usage of the term... apologies. I appreciate the comments, you've all helped me out.

-sc

Even at that, it would be a pointless endeavor. If you were to fall $X short of the full credit, so you increase your tax liability by $X, just so you can get $X more back - your net gain would be $0...


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