Form 8936

The federal government offers a non-refundable income tax credit to help make purchasing an electric vehicle more affordable. The credit starts at $2,500 and goes up to $7,500 for the tax year 2024. The credit is called “The Qualified Plug-in Electric Drive Motor Vehicle Credit,” it reduces your tax liability on a dollar-for-dollar basis. The credit is available to both individuals and businesses. In order to claim the credit, you must file Form 8936 with your return. This form is filed for each year you qualify to claim the credit.

Form 8936 must be filed in the tax year you purchase or place your qualifying vehicle into service. The credit is reported on a separate line in your return. The credit is only available for vehicles that meet the IRS’s specific requirements. For example, vehicles must be manufactured by an eligible manufacturer and meet certain energy efficiency requirements. The IRS lists qualified vehicles and their energy efficiency levels on its website.

How to fill out Form 8936?

There are three parts in Form 8936:

Part I Tentative Credit

You must use separate columns for each vehicle. If you need more columns, you must use additional 8936s and include the totals on line 12 and line 19.

• Enter the year, make, and model of your vehicle here.
• Enter VIN
• Enter the date your vehicle was placed in service.
• Enter the cost of your two-wheeled vehicle. See IRS instructions for your four-wheeled vehicle.
• Enter phase-out percentage.
• Multiply line 4a by line 4b. This is your Tentative credit.

Important: Skip Part II and proceed on Part 3 IF:

• You did not use your vehicle for business or investment purposes and did not have a credit from a partnership or S corp.

Part II Credit for Business/Investment Use Part of Vehicle

• Business/investment use percentage.
• Multiply Line 4c by Line 5. IF your vehicle has at least four wheels, leave lines 7-10 blank and go to line 11.
• Enter Section 179 expense deduction.
• Subtract line 7 from line 6.
• Multiply line 8 by 10%.
• Maximum credit per vehicle.
• For four-wheeled or vehicles with more than four vehicles: Enter the amount from Line 6. For two-wheeled vehicles, enter the smaller amount of line 9 or line 10.
• Add column A and column B on line 11.
• Line 13: Qualified plug-in electric drive motor vehicle credit from partnerships and S corporations
• Line 14: Business/investment use part of credit. Add line 12 and line 13. This is where partnerships and S Corps stop and report the amount on Schedule K. All the others report the amount on Form 3800, part II, Line 1y.

Part III Credit for Personal Use Part of Vehicle

• Enter the amount from line 4c IF you skipped Part II. Subtract line 6 from Line 4c IF you completed Part II. Leave lines 16 and 17 blank and go to line 18 IF your vehicle has four wheels or more.
• Multiply line 15 by 10%
• If you skipped Part II, enter $2,500. If you completed Part II, subtract line 11 from line 10 to figure Maximum credit per vehicle.
• Vehicles with four or more wheels placed in service before 2023: Enter the amount from line 15. IF the vehicle is two-wheeled, enter the smaller of line 16 or line 17. For vehicles placed in service after 2022, see the IRS instructions.
• Enter the amount from Form 1040, 1040-SR, or 1040-NR, line 18
• Personal credits from Form 1040, 1040-SR, or 1040-NR
• Line 22: Subtract Line 21 from Line 20. If what you get is zero or less, enter -0- and stop filling out. You are not eligible for the personal use part of the credit.
• Line 23: Personal use part of credit: Enter the smaller of line 19 or line 22 here and on Schedule 3 (Form 1040), line 6f. If line 22 is smaller than line 19, see the IRS instructions.