The federal government uses a nonrefundable income tax credit as an incentive for taxpayers to purchase a qualified plug-in electric drive motor vehicle. Form 8936 is used to calculate the credit for all qualified electric vehicle purchases after December 31, 2009.
IRC section 30D determines the tax credit eligibility for each manufacturer based on the make, model, and year. The amount of the credit starts at $2,500, and depending on battery capacity the credit increases up to a maximum allowable credit of $7,500. The lifespan of an allowable credit is based on the number of vehicles sold for use in the United States, and once a specific model's sales reach 200,000 vehicles the credit begins to phase out.
To be eligible for the credit, the taxpayer must have in hand the manufacturer's certification at time of purchase that the vehicle meets the requirements for the credit under IRC section 30D.
This is a nonrefundable credit and is only available for use in the tax year in which the vehicle was purchased new. Being a nonrefundable credit, the taxpayer may not claim the credit if they have no tax liability. It also has no carryforward or carryback provision, so any unused credit is lost. It also may be limited based on the presence of other nonrefundable credits in the return and the order in which they are applied to the tax liability.
See the IRS website here for the list of vehicles eligible for the credit. See the EPA website here for the amount of credit available for a particular vehicle as well as its phaseout status. If you purchased the vehicle, you'll need this amount when completing the form.
Note: If the taxpayer is receiving the credit on their Schedule K-1 from a passthrough entity, it isn't necessary to know the vehicle information. The passthrough entity included that info when it filed Form 8936 with its annual return. The taxpayer only needs to indicate on Form 8936 the amount of the credit passed through on Schedule K-1.
To enter the information needed for the plug-in electric vehicle credit in TaxSlayer ProWeb, from the Federal Section of the tax return (Form 1040) select:
- Credits Menu
- Qualified Electric Motor Vehicle Credit
- Qualifying Vehicle - Enter all the information about the vehicle, indicating the manufacturer, make, and model, if the vehicle has two or three wheels, the date it was placed in service, and its purchase price.
- Check if the vehicle was used for business or investment purposes - If the vehicle was purchased for use in your business and isn't a credit from a passthrough, for the purposes of the General Business Credit indicate if the credit relates to passive or nonpassive activity as well as the percentage of business or investment use. (See the Form 8936 instructions for assistance if unclear how to calculate the percentage of business use if it's less than 100%.) If the vehicle is a 2- or 3-wheeled vehicle, indicate the amount of section 179 deduction taken, if any.
- Credit from Partnership or S Corporation - If the credit is indicated on the taxpayer's Schedule K-1 from a partnership (Box 15 code P) or an S corporation (Box 13 code P), enter the amount of the credit here, the entity's EIN (as indicated on Schedule K-1) and, for the purposes of the General Business Credit, indicate if the taxpayer's participation in the partnership or S corporation activity is passive or nonpassive.
Note: This article is intended to provide guidance on entering the Qualified Plug-In Electric Drive Motor Vehicle Credit into TaxSlayer ProWeb. It is not intended as tax advice.