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. 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.
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.
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 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.
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 the tentative credit on Schedule A (Form 8936) line 9.
See here for more information commercial clean vehicles.
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 ProWeb, 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 ProWeb, from the Federal Section of the tax return (Form 1040) select:
- Deductions
- Credits
- Qualified Plug-in Electric Drive Motor Vehicle Credit
Prior Year Adjusted Gross Income
In the first section, you'll enter information about the prior year AGI and indicate whether or not the vehicle was used for business purposes:
- Prior year adjusted gross income - Enter the prior year AGI on Form 1040 line 11. (The form requires this entry.)
- Prior year excluded Puerto Rico income - Enter the amount of income from Puerto Rico that was excluded last year, if any.
- Prior year Form 2555 housing exclusion - Enter the amount on Form 2555 line 45 last year, if any.
- Prior year Form 2555 housing deduction - Enter the amount on Form 2555 line 50 last year, if any.
- Prior year Form 4563 amount - Enter the amount on Form 4563 line 15 last year, if any (Exclusion of Income for Bona Fide Residents of American Samoa).
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Check here if you are filing this credit for personal use only - If the vehicle is being used solely for personal reasons, no business use, check this box. Don't check this box if the credit is being passed through on Schedule K-1.
- Type of Credit Activity - If you didn't check the personal use only check box, select from the drop down menu the kind of business activity the vehicle was used in, whether passive or nonpassive.
Click CONTINUE when finished.
Qualifying Vehicle Information
Skip this section if the only credit in the return is being passed through on Schedule K-1, otherwise complete this section if the taxpayer purchased the vehicle.
Enter the information about the qualifying vehicle. All fields are required.
- Year - Select the year of manufacture in the drop down menu.
- Make - Enter the manufacturer's name.
- Model - Enter the model name or number.
- Vehicle Identification Number (VIN) - Enter the VIN.
- Date Placed in Service - The date the taxpayer took possession of the vehicle.
- Vehicle was used primarily outside the United States - Click Yes 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 Yes is selected, no credit is allowed.)
At this point, you are presented with a series of questions that will vary depending on what kind of vehicle this is. Click the menu below for the type of vehicle the credit is for.
New Clean Vehicle
Does the VIN belong to a new clean vehicle placed in service during the tax year? - Click Yes.
Did you acquire the vehicle for use or lease to others and not for resale? - If the taxpayer bought the vehicle to resell or is leasing the vehicle, click No, otherwise click& Yes. If Yes, you have two more fields to complete:
Business/Investment Tentative Credit Amount - Enter the amount of the credit this vehicle is eligible for. This amount is on Form 15400 or can be gotten at fueleconomy.gov (see links above).
Business/Investment Use Percentage - If the taxpayer uses the vehicle in their business (reported on Schedule C, E, or F), enter the percentage of the total business mileage. If the vehicle is used solely for business, enter 100. If the vehicle is partly used for business, calculate the business use percentage as follows:
( business miles / total miles ) x 100
If during the tax year the vehicle's use changed from personal to business (or vice-versa), calculate the business use percentage as follows:
( business miles / total miles during bus. period ) x ( months used for business / 12 ) x 100
Previously Owned Clean Vehicle
Does the VIN belong to a new clean vehicle placed in service during the tax year? - Click No.
Does the VIN entered belong to a previously owned clean vehicle acquired after 2022 and placed in service during the tax year? - Click Yes.
Did you acquire the vehicle for use or lease to others and not for resale? - If the taxpayer bought the vehicle to resell or is leasing the vehicle, click No, otherwise click Yes. If Yes, you have one more question and one more field to complete.
Is the vehicle a qualified fuel cell motor vehicle? - Fuel cell vehicles convert oxygen and hydrogen to electricity and are uncommon. Click Yes or No as appropriate.
Sales price of the vehicle - Enter the total sale price of the vehicle as shown on Form 15400.
Qualified Commercial Clean Vehicle
Does the VIN belong to a new clean vehicle placed in service during the tax year? - Click No.
Does the VIN entered belong to a previously owned clean vehicle acquired after 2022 and placed in service during the tax year? - Click No.
Does the VIN entered on line 2 belong to a qualified commercial clean vehicle acquired after 2022 and placed in service during the tax year? - Click Yes.
Is the vehicle of a character subject to the allowance for depreciation? - Click Yes if the taxpayer is using the vehicle in a trade or business or for the production of income.
Did you acquire the vehicle for use or lease to others, and not for resale? - If the taxpayer bought the vehicle to resell or is leasing the vehicle, click No, otherwise click Yes. If Yes, you have one more question and three more fields to complete.
Is the vehicle also powered by gas or diesel? - Click Yes if this is a hybrid vehicle, otherwise if it's an all-electric vehicle click No.
Vehicle cost or other basis - Enter the basis of the vehicle purchased.
Vehicle section 179 expense deduction - Enter any section 179 expense deduction claimed for this vehicle in Part I of Form 4562.
Vehicle incremental cost - The incremental cost is the excess of the purchase price of this vehicle over the purchase price of a gas or diesel vehicle that is comparable in size and use. The maximum that can be entered is $7,500 for a vehicle with a gross vehicle weight rating (GVWR) under 14,000 pounds, or $40,000 for a vehicle with a GVWR of 14,000 pounds or more. Note that you must have an entry in this field - no credit will calculate otherwise.
When finished, either click SAVE & ATTACH VIN STATEMENT to save your work and proceed to a page where you can attach a PDF copy of Form 15400, or click CONTINUE to proceed without attaching Form 15400.
If you have another vehicle to add, click + Add a Qualifying Vehicle and repeat the steps above, otherwise click CONTINUE.
New Clean Vehicle Credit from Pass-Through
If the taxpayer received a new clean vehicle credit from a passthrough entity, select this menu line and enter the information about the credit:
- Pass-through EIN - Enter the passthrough entity's EIN.
- Pass-through name - Enter the passthrough entity's name.
- Activity credit amount - Enter the amount of the credit on the Schedule K-1.
- Type of credit activity - Select from the drop down menu the kind of business activity the vehicle was used in, whether passive or nonpassive.
Click CONTINUE when finished. If you have another passthrough credit to enter, click + Add another item and repeat the steps above, otherwise click CONTINUE.
Commercial Clean Vehicle Credit from Pass-Through
If the taxpayer received a qualified commercial clean vehicle credit from a passthrough entity, select this menu line and enter the information about the credit:
- Pass-through EIN - Enter the passthrough entity's EIN.
- Pass-through name - Enter the passthrough entity's name.
- Activity credit amount - Enter the amount of the credit on the Schedule K-1.
- Type of credit activity - Select from the drop down menu the kind of business activity the vehicle was used in, whether passive or nonpassive.
Click CONTINUE when finished. If you have another passthrough credit to enter, click + Add another item and repeat the steps above, otherwise click CONTINUE.
New Clean Vehicle Credit Carryforwards/Carrybacks
If the taxpayer has a clean vehicle credit from Form 8936 carryforward or carryback being applied this year, select this menu and enter the following information:
- Tax year in which the credit originated - Enter the year the credit is coming from.
- Pass-through entity EIN - Enter the EIN of the pass-through entity the credit came from.
- Credit carryforwards excluding eligible small business credits (ESBCs) - Enter the credit amount.
- Type of credit activity - Select from the drop down menu the kind of business activity the vehicle was used in, whether passive or nonpassive.
Commercial Clean Vehicle Credit Carryforwards/Carrybacks
If the taxpayer has a qualified commercial clean vehicle credit from Form 8936 carryforward or carryback being applied this year, select this menu and enter the following information:
- Tax year in which the credit originated - Enter the year the credit is coming from.
- Pass-through entity EIN - Enter the EIN of the pass-through entity the credit came from.
- Credit carryforwards excluding eligible small business credits (ESBCs) - Enter the credit amount.
- Type of credit activity - Select from the drop down menu the kind of business activity the vehicle was used in, 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 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.
I don't see the menu item asking if "Vehicle Acquired for use or to Lease to Others".
- If this is a qualified commercial clean vehicle, you indicated that it is not of a character subject to the allowance for depreciation.
- You indicated that the vehicle is neither a new clean vehicle, a previously owned clean vehicle, or a 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.
I don't see where to enter the tentative credit amount.
- If this is a new clean vehicle, you have 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.
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 TaxSlayer ProWeb. It is not intended as tax advice.
Additional Information: