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, but credit for this kind of vehicle is not available for a business.
For a business, there are two kinds of vehicles that may be eligible for the Clean Vehicle Credit on Form 8936:
- New 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 whether the credit is from a new clean vehicle or a qualified commercial clean vehicle. Each type of vehicle has its own requirements for qualifying and calculating the credit.
A vehicle may qualify for both the new clean vehicle credit and the qualified commercial clean vehicle credit. If so, the business can claim either one, but not both. See here for a comparison of the qualifications and features of the two types of vehicles.
Form 15400
At the time of sale the dealer must report the sale to the IRS on Form 15400 and give the business a copy of the form.
If the business hasn't got a copy of Form 15400, the vehicle may not be eligible for the new 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.
Be sure the vehicle is eligible for the credit
The business is not eligible for the Clean Vehicle Credit if it is leasing the vehicle (only the lessor is eligible for the credit) or if the vehicle was purchased for resale.
Don't complete Form 8936 if the business 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 here.
Basis adjustment for depreciation
Unless the business elects not to take the credit, in the vehicle's entry in the depreciation module be sure to reduce its basis by the amount of the tentative credit on Schedule A (Form 8936). On Form 8936, the tentative credit is found here:
- New Clean Vehicle - Schedule A (Form 8936) line 9.
- Qualified Commercial Clean Vehicle - Schedule A (Form 8936) line 26.
Finding Form 8936
To complete Form 8936 for a clean vehicle in TaxSlayer Pro, follow the menu path for the type of return you are completing:
S corporation (Form 1120-S)
- Schedule K
- Credits & Credit Recapture
- General Business Credits
- Current Year General Business Credits
- Form 8936, Part II or Part V - Both take you to the same menu.
Partnership (Form 1065)
- Schedule K
- Credits & Credit Recapture
- General Business Credits
- Current Year General Business Credits
- Form 8936, Part II or Part V - Both take you to the same menu.
Corporation (Form 1120)
- Tax and Payments
- Total Tax (Schedule J)
- Total Credits
- General Business Credits (Form 3800)
- Current Year General Business Credits
- Form 8936, Part II or Part V - Both take you to the same menu.
Estate or Trust (Form 1041)
- Tax and Payments
- Total Tax (Schedule G)
- General Business Credit (Form 3800)
- Current Year General Business Credits
- Form 8936, Part II or Part V - Both take you to the same menu.
Exempt Organization filing a Business Income Tax Return (Form 990-T)
A tax-exempt entity does not complete Form 8936 in TaxSlayer Pro. Rather, the form can be filled in and printed at the IRS website here.
Where the credit is entered in the return depends on whether or not the entity has registered with the IRS for elective payment or transfer of credits. (See here for more information about this election.)
If the organization has not registered, enter the credit here:
- Credits
- General Business Credit - Enter the amount of credit from Form 8936.
If the organization has registered, enter the credit here:
- Credits
- Payments, Penalties, etc.
- Elective Payment Election from Form 3800 - Enter the amount of credit from Form 8936,
You'll also need to file Form 990-T in paper form, attaching Form 8936, Schedule A (Form 8936), and Form 3800 to it.
Completing Form 8936
If the only credit in the return is from another passthrough entity reported on Schedule K-1, select New Clean Vehicle Credit from Passthru or Part V - Commercial Clean Vehicle Credit from Passthru as appropriate. You will not enter information about the vehicle since the other passthrough entity completed Form 8936 for it.
Otherwise, If the business entity purchased a clean vehicle, 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.
To enter information about the vehicle select:
-
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 entity took possession of the vehicle.
- Vehicle was used primarily outside the United States - 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 and there's no need to proceed further with the form.)
- Check one of the following two 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 and the business is claiming the new clean vehicle credit.
- 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 was purchased new and the business is claiming the qualified commercial clean vehicle credit. See here for more information commercial clean vehicles.
Do not check the previously owned clean vehicle check box as this credit is not available to businesses, only individuals.
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.
New Clean Vehicle
Attach Substantiate VIN Statement - You can attach a copy of Form 15400 in the PDF attachment point if desired.
Business/Investment Vehicle Acquired for Use or to Lease to Others - Select this line and answer Yes unless (a) the vehicle was purchased for resale or (b) the business entity is leasing the vehicle. After answering Yes, two additional fields will appear that require completion:
- 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 here.
- Business/Investment Use Percentage - Enter 100.
Qualified Commercial Clean Vehicle
Attach Substantiate VIN Statement PDF - You can attach a copy of Form 15400 in the PDF attachment point if desired.
Commercial Vehicle Subject to the Allowance of Depreciation - Answer Yes.
Commercial Vehicle Acquired for Use or to Lease to Others - Select this line and answer Yes unless (a) the vehicle was purchased for resale or (b) the business entity is leasing the vehicle. (Note that no credit is allowed if the answer is No.)
Commercial Vehicle Also Powered by Gas or Diesel - If this is a hybrid vehicle, answer Yes.
Commercial Vehicle Cost or Other basis - Enter the basis of the vehicle purchased.
Commercial Vehicle Section 179 Expense Deduction - Enter any section 179 expense deduction claimed for this vehicle in Part I of Form 4562.
Commercial 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 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.
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 - This menu line can be ignored as it applies to individual taxpayers only.
- New Clean Vehicle Credit from Passthru - If this entity received a new clean vehicle credit from another 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 this entity received a commercial clean vehicle credit from another 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 - This menu line is only applicable to tax-exempt entities including the credit with Form 990-T.
- Type of Credit Activity - This menu line is visible in the corporate return (Form 1120) and the estate and trust return (Form 1041). In those returns, select this menu line to indicate the type of business activity for general business credit purposes, whether passive or nonpassive.
Passthrough Entities: Report the credit on each Schedule K-1
If this is a passthrough entity, the General Business Credit showing on Schedule K does not flow to the individual Schedule K-1(s). You'll need calculate the appropriate amount of credit for each shareholder or partner, then enter that amount in each Schedule K-1.
Note: Before entering an amount on Schedule K-1, you'll need to change the automatic distribution question in the Schedule K menu from Yes to No so that your direct entries on the Schedule(s) K-1 will remain. Once changed to No, don't change to Yes, otherwise your direct entries on Schedule K-1 will be removed. Thus, it's best to wait to make these direct entries once you have finished with the federal partnership return.
S corporation
The amount of the credit on a shareholder's Schedule K-1 equals the total credit multiplied by the percentage in Schedule K-1 item G.
For each shareholder, select to edit their Schedule K-1 and navigate here:
- Distributive Share Items
-
Credits - Select the appropriate credit for the type of vehicle and enter the credit amount:
-
13AY - Form 8936, Part II - New clean vehicle credit
or - 13AZ - Form 8936, Part V - Qualified commercial clean vehicle credit
-
13AY - Form 8936, Part II - New clean vehicle credit
Partnership
Unless provided for otherwise in the partnership agreement, the amount of the credit on a partner's Schedule K-1 equals the total credit multiplied by their percentage share of capital. (If a partner's percentage share of capital changed during the year, a reasonable allocation will need to be made, e.g., figuring the average daily percentage based on each day's share over the year.)
For each partner, select to edit their Schedule K-1 and navigate here:
- Distributive Share Items
-
Credits & Credit Recapture - Select the appropriate credit for the type of vehicle and enter the credit amount:
-
15AY - Form 8936, Part II - New clean vehicle credit
or - 15AZ - Form 8936, Part V - Qualified commercial clean vehicle credit
-
15AY - Form 8936, Part II - New clean vehicle credit
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 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.
In a corporate return (Form 1120), no credit is showing on Schedule J.
- Revisit the Form 8936 menu, then print Form 3800 and examine the calculation in Part II to see how much credit is being allowed.
In a estate or trust return (Form 1041), no credit is showing on Schedule G.
- Revisit the Form 8936 menu, then print Form 3800 and examine the calculation in Part II to see how much credit is being allowed.
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 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.
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".
In the Vehicle Details Entry window I select a new clean vehicle or a qualified commercial clean vehicle, but the selection keeps being removed.
- 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 a business return in the TaxSlayer Pro program. It is not intended as tax advice.
Additional Information: