This article explains how to claim the maximum credit amount for business/investment use of an electric vehicle on Form 8936.
- The maximum amount of the credit for business/investment use part of an electric vehicle is $2,500.
- Additional amounts can be added to the base amount if certain conditions are met.
- The additional credit is available for vehicles with at least four wheels and a capacity of more than 5 kilowatt hours.
- The credit maximum increases incrementally $417 per additional kilowatt-hour in excess of 5 hours, up to a maximum of $7,500.
New for Form 8936 for tax year 2023:
- A new clean vehicle credit for new electric vehicles meeting specific requirements
- A credit for previously owned clean vehicles
- A credit for qualified commercial clean vehicles
Tax-exempt and governmental entities may also elect to treat their credits as a payment of income tax. However, credit for plug-in electric-drive motor vehicles is no longer available for vehicles placed in service after 2022 and final assembly of the vehicle must occur within North America for vehicles purchased after August 16, 2022. See here for more details.
How to claim the additional credit amount for tax year 2023
- Go to Screen 34, General Business & Vehicle Credits
- If this is related to a business activity, in the Credits section, enter the Form (Ctrl+T) using the dropdown, the Activity name or number (Ctrl+T), and Taxpayer, Spouse, or Joint (if applicable).
- If this is not related to a business activity, continue to step 3.
- Locate the Clean Vehicle Credit (8936) section on the lower left panel, or by scrolling down.
- Begin by entering the Part I: Vehicle Details.
- Continue by answering the questions presented on Screen 34 in order.
- Follow the directions on the input screen until you complete the input and generate the form, or until you see Stop here which indicates the vehicle doesn't qualify for a credit.
- If Part II is needed, an entry is required for tentative credit amount to generate the form.
- If using the new Elective Payment option for tax year 2023 use the new Elective Payment fields.
- If filing an elective payment on the Form 3800 the IRS requires a registration number that you must complete before filing the tax return. See here for more information.
1040 filers using the new Credit transferred or Gross elective payment fields will receive Critical Diagnostic ref 60077 until the calculations are ready and may want to file extensions for the upcoming 4/15 deadline.
Additionally, make sure to review each blue note referenced on the page to determine whether or not it is applicable to your client.
How to claim the additional credit amount for tax year 2022 and prior
- Go to Screen 34, General Business & Vehicle Credits.
- Scroll down to the section Clean Vehicle Credit.
- Under subsection Form 8936, enter the Kilowatt hour capacity (x.xxx) for the vehicle.
For more information
- See IRC Section 30D, Plug-In Electric Drive Vehicle Credit
- For information on inputs to generate Form 8936, see Generating Form 8936 for a vehicle that isn't two- or three-wheeled
