Overview
Beginning in tax year 2023, Form 8936, Clean Vehicle Credits, is used to calculate electric vehicle (EV) and fuel cell vehicle (FCV) tax credits. Credits for purchases of these two kinds of vehicles were previous calculated on separate forms:
- From 2009-2022, Form 8936 was used to calculate the Qualified Plug-in Electric Drive Motor Vehicle Credit.
- From 2005-2022, Form 8910 was used to calculate the Alternative Motor Vehicle Credit.
Additionally, the Inflation Reduction Act of 2022 expanded the Clean Vehicle Credit to include previously owned clean vehicles purchased from a licensed dealer.
Three kinds of vehicle credits are reported on Form 8936:
- New Clean Vehicle
- Previously Owned Clean Vehicle
- Qualified Commercial Clean Vehicle (see here for IRS information on this credit)
In TaxSlayer Pro, when entering the details about the vehicle you'll specify which of the three kinds of vehicles this is. Each type of vehicle has its own requirements for qualifying and calculating the credit.
For a new clean vehicle and a previously owned clean vehicle, the taxpayer is eligible to take the clean vehicle credit if their current year or prior year modified AGI is within the statutory limits:
- Single and MFS: $150,000.
- MFJ and QSS: $300,000.
- HOH: $225,000.
Modified AGI equals AGI plus the housing exclusion or housing deduction on Form 2555, plus any income from Puerto Rico or American Samoa that was excluded.
Form 15400
For both new and previously owned clean vehicles, at the time of sale the dealer must report the sale to the IRS on Form 15400 and give the taxpayer a copy of the form.
If the taxpayer hasn't got a copy of Form 15400, the vehicle may not be eligible for the new or previously owned clean vehicle credit. For example, only dealers complete Form 15400, so a vehicle not purchased from a dealer isn't eligible for the credit.
However, for a new vehicle the dealer won't complete this form if the vehicle's MSRP exceeds the statutory limitation, if the vehicle's final assembly was not in North America, or if the buyer is unwilling to provide the dealer with their taxpayer identification number.
Similarly, for sales of previously owned vehicles the dealer won't complete Form 15400 if the sales price exceeds $25,000, if the vehicle is less than two model years old, or if the buyer is unwilling to provide the dealer with their taxpayer identification number.
Be sure the vehicle is eligible for the credit
The taxpayer is not eligible for the Clean Vehicle Credit if they are leasing the vehicle (only the lessor is eligible for the credit) or if they purchased the vehicle for resale.
Don't complete Form 8936 if the taxpayer hasn't got a copy of Form 15400. Aside from this form you can check whether or not the vehicle model is otherwise eligible for the Clean Vehicle Credit at fueleconomy.gov:
- For new clean vehicles purchased in 2023 or after, click here.
- For used clean vehicles purchased in 2023 or after, click here.
- For new clean vehicles purchased before 2023, click here.
Additionally, the Form 8936 instructions are an important resource as they detail all the requirements for each clean vehicle credit.
Business use caveats
Qualified commercial clean vehicles are not subject to the MSRP limitation, and the credit that calculates won't be limited by the taxpayer's modified AGI.
For a new clean vehicle being used in business, in its entry in the depreciation module be sure to reduce its basis by the amount of either the tentative credit on Schedule A (Form 8936) line 9 or the amount of the credit transferred to the dealer, whichever is appropriate.
Completing Form 8936
When completing Form 8936, you will complete Schedule A (Form 8936) for each vehicle placed in service during the tax year. Schedule A is a two-page form that provides details about the vehicle and calculates the credit for the vehicle.
When completing the form for a new clean vehicle in TaxSlayer Pro, several of the Schedule A menu lines include the words "business/investment" as that is the terminology used on the form, but this section must be completed for every taxpayer claiming the new clean vehicle credit irrespective of whether or not the vehicle was used for business purposes.
To complete Form 8936 for a clean vehicle in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Credits
- (2024 fwd) Clean Vehicle Credits
(2023) Qualified Plug-in electric Drive Motor Vehicle Credit
If the only credit in the return is being passed through on Schedule K-1, select New Clean Vehicle Credit from Passthru or Part V - Commercial Clean Vehicle Credit from Passthru as appropriate. There's no need to enter information about the vehicle since the passthrough entity completed Form 8936 for it.
Otherwise, if the taxpayer purchased the vehicle, enter information about the vehicle:
-
Edit Qualified Vehicle Credit Information - Click New and enter the vehicle's information:
- Year of Vehicle
- Make of Vehicle
- Model of Vehicle
- Vehicle Identification Number
- Date Placed in Service - The date the taxpayer took possession of the vehicle.
- Credit Amount Transferred to Dealer at Time of Sale - For tax years after 2023, the taxpayer has the option to transfer the credit to the dealer, taking the credit as a reduction in the purchase price of the vehicle. If the taxpayer did that, enter the amount of the credit transferred here. (Note that if you make an entry here you will not enter an amount as the tentative credit amount later, since they have already received the benefit of the credit.)
- (2023 only) Vehicle was used primarily outside the United States - For tax year 2023, check this box if the vehicle was mainly used outside the US, with an exception being for a vehicle that travels from and back to the US. (Note that if this box is checked, no credit is allowed.)
- Check one of the following three check boxes:
- VIN entered belongs to a new clean vehicle placed in service during the tax year - Check this box if the vehicle was purchased new.
- VIN entered belongs to a previously owned clean vehicle acquired after 2022 and placed in service during the tax year - Check this box if the vehicle was previously owned.
- VIN entered belongs to a qualified commercial clean vehicle acquired after 2022 and placed in service during the tax year - Check this box if the vehicle is used exclusively in the taxpayer's business. See here for more information commercial clean vehicles.
When finished entering the above information, click OK. Depending on which of the three check boxes was checked, you will be asked additional questions about the vehicle.
New clean vehicle - If it's a new clean vehicle, you'll be asked if it was sold within 30 days of purchase, and if so the sales price. You'll also be asked if the vehicle was acquired for use or to lease to others. Answer Yes if the taxpayer is using the vehicle or leasing it to someone else. Answer No if the taxpayer bought the vehicle for resale or is leasing the vehicle.
Previously owned clean vehicle - If it's a previously owned clean vehicle, you'll be asked if
Commercial clean vehicle - If it's a vehicle being used in a business, you'll be asked if it is of the character subject to depreciation. Generally answer Yes (certain tax-exempt entities may answer No).
When asked for the Tentative Credit Amount, only enter an amount if the credit was not transferred to the dealer.
When finished with the above information, click OK to arrive at the Vehicle Information Menu. The items in this menu will vary depending on which kind of vehicle this is. Click the menu below for the type of vehicle the credit is for.
Select Exit to return to the Vehicle Information window where you began the process. If you have another vehicle to enter, click New and repeat the above steps, otherwise click Exit.
The Clean Vehicle Credits Menu
Complete the additional menu lines in the Clean Vehicle Credits Menu as needed:
-
Prior Year Modified Adjusted Gross Income - Select this line and enter a few amounts from last year's tax return to calculate the taxpayer's prior year modified AGI:
- Prior Year Adjusted Gross Income - Form 1040 line 11.
- Prior Year Excluded Puerto Rico Income - Enter the amount of any Puerto Rico income that was excluded.
- Prior Year Form 2555 Housing Exclusion - Form 2555 line 45.
- Prior Year Form 2555 Housing Deduction - Form 2555 line 50.
- Prior Year Form 4563 Amount - Form 4563 line 15 (American Samoa income).
- New Clean Vehicle Credit from Passthru - If the taxpayer received a new clean vehicle credit from a passthrough entity on Schedule K-1, select this line, click New, and enter the entity's EIN and name, the amount of the credit, and the type of business activity for general business credit purposes, whether passive or nonpassive.
- Part V - Commercial Clean Vehicle Credit from Passthru - If the taxpayer received a commercial clean vehicle credit from a passthrough entity on Schedule K-1, select this line, click New, and enter the entity's EIN and name, the amount of the credit, and the type of business activity for general business credit purposes, whether passive or nonpassive.
- Part V - Elective Payments - In TaxSlayer Pro, this menu line is only applicable to a tax-exempt organization filing Form 990-T. See here for more information about elective pay.
- Type of Credit Activity - If the taxpayer is claiming the commercial clean vehicle credit or has a business use percentage greater than 0% indicated on their new clean vehicle credit, specify here the type of business activity for general business credit purposes, whether passive or nonpassive.
Troubleshooting
No credit is calculating on Form 8936.
- There must be tax liability to apply the credit to (see the following question).
- If it's a new clean vehicle, two things are required:
- You must indicate that it was acquired for use or to lease to others.
- You must enter the tentative credit amount if the credit was not transferred to the dealer.
- If it's a previously owned clean vehicle, three things are required:
- You must indicate that it was acquired for use or to lease to others.
- You must enter the vehicle sales price.
- The vehicle sales price cannot exceed $25,000.
- If it's a qualified commercial clean vehicle credit, four things are required:
- You must indicate that the vehicle is subject to depreciation.
- You must indicate that it was acquired for use or to lease to others.
- You must enter the cost basis.
- You must enter the incremental cost.
No credit is showing on Schedule 3
- The Clean Vehicle Credit is a nonrefundable credit. If Form 1040 line 18 equals $0, no credit is allowed.
The new clean vehicle credit flows to Schedule 3 line 6f, and the previously owned clean vehicle credit flows to Schedule 3 line 6m. If Form 1040 line 18 is greater than $0 but no credit is flowing to Schedule 3, other nonrefundable credits are being applied against the tax liability before this credit so that there's no remaining liability to apply this credit to.
The full credit isn't being given
- The Clean Vehicle Credit is one of many nonrefundable credits applied against the tax liability calculated on Form 1040 line 18, and nonrefundable credits are generally applied against the tax liability in their order on Schedule 3 Part I.
To diagnose why a smaller than expected amount of credit is being allowed, compare Form 1040 line 18 with Schedule 3 Part I. You'll see the nonrefundable credits in the return and the order in which they are being applied against the tax liability.
Note that nonrefundable credits are not applied against any tax in Schedule 2 Part II. This includes self-employment tax, additional tax calculated on Form 5329, additional tax on HSA distributions, and many others.
Full credit is being given but the taxpayer's modified AGI is too high
- You didn't indicate the taxpayer's prior year modified AGI, so the prior year modified AGI being zero makes them qualify. To ensure they qualify and to avoid a reject, enter their prior year modified AGI information. The form requires it.
I don't see the menu item asking if "Vehicle Acquired for use or to Lease to Others".
- You didn't indicate in the Vehicle Details Entry window what kind of vehicle this is, whether a new clean vehicle, a previously owned clean vehicle, or a qualified commercial clean vehicle.
I'm not being asked for the sales price of the vehicle.
- The sales price of the vehicle is only asked in the context of a previously owned clean vehicle or a vehicle sold within 30 days of purchase.
I don't see where to enter the tentative credit amount.
- If this is a new clean vehicle, you have either not answered or answered No to the question "Vehicle Acquired for Use or to Lease to Others".
- If this is a previously owned clean vehicle, there is no tentative credit. Instead, the credit is calculated based on the sales price.
Exiting the Form 8936 menu I'm told "You must Select the Type of Credit Activity."
- This is either a new clean vehicle with some percentage of business use entered, or it's a qualified commercial clean vehicle. The business portion of the credit is a general business credit, and you must specify whether the business activity is passive or nonpassive. Make this selection in the Clean Vehicle Credits Menu under Type of Credit Activity.
In the Vehicle Details Entry window I select one of the three kinds of vehicles (new, previously owned, or commercial), but the selection keeps being removed.
- 2023 only, you have indicated that the vehicle was used primarily outside the United States. No credit is allowed if this is true.
I'm being told "Invalid VIN".
- You have miskeyed the VIN. Double-check your work against Form 15400.
Note: This a guide on entering clean vehicle credit information in Form 8936 in the TaxSlayer Pro program. It is not intended as tax advice.
Additional Information:
IRS: 2023 Form 8936 instructions
IRS: FAQ about the Clean Vehicle Credit
IRS: FAQ about transfer of New Clean Vehicle Credit and Previously Owned Clean Vehicles Credit
Desktop: 2022 and prior: Form 8936 - Qualified Plug-in Electric Drive Motor Vehicle Credit
Desktop: Business Returns: Form 8936 - Clean Vehicle Credit