What campfamily said. it's how much you owe in federal taxes that counts. For example if you only owe $5,000 in Federal income tax then you only get $5,000 of the $7,500 credit and you lose out on the extra $2,500. It does not carry over to the next year. So in order to use the full credit you must owe at least $7,500 in federal income tax. How much withholding you've had from your paycheck have no bearing. For example if you owe $7,500 in federal tax and $8,000 was withheld from your paychecks you would simply apply the tax credit and get all of your $8,000 back that you so generously loaned interest free to uncle Sam.