What Is Form 8936? Form 8936 Complete Guide by a CPA!Personal Taxes
Form 8936 is the IRS tax form used to determine and report the tax credit for qualified plug-in electric vehicles.
This credit is available on the purchase of certain two-, three-, and four-wheel vehicles with a gross vehicle weight of less than 14,000 pounds and are propelled to a significant extent by an electric motor.
Because this credit can be claimed for both business and personal use, Form 8936 has three parts: one to determine the amount of the credit, another to determine the credit for the business-use portion of the vehicle, and the last to determine the credit for the personal-use portion of the vehicle.
Definition and Example of Form 8936
Form 8936 is the tax form used to report the federal credit for qualified plug-in electric vehicles.
For example, if a taxpayer purchases a Clarity Plug-In Hybrid, they may be eligible for a $7,500 tax credit. In order to claim this credit, the taxpayer must complete and file Form 8936 with their tax return.
Who Uses Form 8936?
Form 8936 is used by individuals, businesses, and the IRS.
Individuals — including sole proprietors — use Form 8936 to report the amount of their tax credit for qualified plug-in electric vehicles.
Businesses such as partnerships and S corporations also use Form 8936 to claim the credit for electric vehicles purchased by the business.
Since these businesses are pass-through entities that do not pay federal income tax, the credit that is generated at the entity level and reported on the entity’s Form 8936 is allocated to the partners (if a partnership) or shareholders (if an S corporation) on their respective Schedule K-1s.
These partners or shareholders, then, do not need to file Form 8936 themselves — they can simply report their allocated credit amount on Form 3800.
After Form 8936 is filed along with the filer’s tax return, the IRS reviews it for accuracy. If the IRS believes that the amount of the credit reported on Form 8936 is incorrect or that the taxpayer is not eligible to claim the credit, they may send the taxpayer a Form 886-A requesting clarification.
Where to Get a Form 8936
Form 8936 can be downloaded from the IRS website as a PDF.
If you use a tax software to file your taxes, you can simply complete Form 8936 in your tax software as well.
How to Fill Out Form 8936
Form 8936 has three parts.
Part I is used to identify the vehicle and determine the maximum amount of the credit possible for that vehicle in the case of a four-wheel vehicle and the cost of the vehicle in the case of a two- or three-wheel vehicle.
Part II is used to determine the amount of the credit attributable to business use of the vehicle.
Part III is used to determine the amount of the credit attributable to personal use of the vehicle.
In order to complete Part I, you will need to know the year, make, and model of your vehicle as well as its vehicle identification number (VIN) and the date you purchased it or the date you placed it in service for your business if that date is different from the purchase date.
If the vehicle is a two- or three-wheel vehicle, you will need to know the cost of the vehicle since the credit for two- and three-wheel vehicles is generally equal to 10% of the cost of the vehicle less any Section 179 expense deduction claimed on the vehicle. The credit for two- and three-wheel vehicles is capped at $2,500.
However, for four-wheel vehicles, the credit amount is equal to $2,500 plus $417 for each full hour of electric battery capacity beyond four hours up to a total per-vehicle credit of $7,500. To assist taxpayers, the IRS maintains an online database indicating the credit amount by make, model, and year.
On Line 4a, You will input either the cost of the vehicle or the credit amount for your vehicle set by the IRS.
Additionally, the credit starts to phase out for all otherwise qualifying vehicles manufactured by a particular manufacturer when that manufacturer has sold at least 200,000 qualifying vehicles in the United States after December 1, 2009.
The phaseout is complete for General Motors and Tesla, so the credit is no longer available for vehicles manufactured by these manufacturers.
For this reason, the phaseout amount on Line 4b is generally 100% — meaning there is no phaseout yet — except for vehicles manufactured by Tesla and General Motors, in which case the phaseout percentage is 0%, which indicates that the credit is entirely phased out for these vehicles.
If you use your qualifying electric vehicle at all for business, you need to complete Part II of Form 8936.
In this part you calculate the business-use percentage of your vehicle and multiply the credit amount determined in Part I by this percentage.
Also, individuals who are partners in a partnership or shareholders in an S corporation who are allocated a portion of the business entity’s qualified plug-in electric drive motor vehicle credit report this allocated amount in Part II as well but only if they have other information to report on Form 8936. If they are only claiming the credit through a partnership or S corporation, then they do not need to use Form 8936 and may report their share of the credit directly on Form 3800.
If you use your qualifying electric vehicle at all for personal use, you need to complete Part III of Form 8936.
In this part you calculate the portion of the credit attributable to your personal use of the vehicle. This is generally the credit amount less the portion of the credit attributable to your business use.
To complete Part III, you will also need information from other parts of your tax return, such as the amount of your regular income tax liability, the amount of your alternative minimum tax liability, the amount of your excess advance premium tax credit repayment, and the amount of any other personal credits reported on your Form 1040.
Can Form 8936 Be E-Filed?
Yes, Form 8936 can be e-filed as part of your tax return.
However, if there is some aspect of your tax return that prevents your tax return from being e-filed, you would have to mail your tax return, including Form 8936, to the IRS.
Where to Mail Form 8936
If you paper file your tax return, you would mail Form 8936 along with your tax return to the address found in your tax return’s instructions.
For example, if your S corporation is claiming the qualified plug-in electric drive motor vehicle credit, you would look at the “Where to File” in the instructions to determine the address to mail your S corporation’s tax return, which would include Form 8936.
How to File Form 8936
Form 8936 is filed with the tax return for the year you are claiming the qualified plug-in electric drive motor vehicle credit.
You can e-file your tax return using a tax software or professional preparer or you could print out your tax return, including Form 8936, and mail it to the IRS.
Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.