Umair Gaines
If you've recently purchased an electric vehicle (EV), you may be eligible for a tax credit. To claim this credit, you'll need to file IRS Form 8936: Qualified Plug-in Electric Drive Motor Vehicle Credit with your tax return. This form allows you to receive a tax credit for purchasing an electric plug-in vehicle, which can provide a nice tax break. The credit is available for both four- and two-wheeled vehicles, including cars, motorcycles, and plug-in hybrid models. To properly complete Form 8936, you'll need to provide the Vehicle Identification Number (VIN) for your electric vehicle. Additionally, the seller or dealer is required to report certain information about the vehicle to both you and the IRS. It's important to note that this credit does not apply to electric bikes and that not all vehicles qualify for the credit. Make sure to review the eligibility requirements and consult with a tax professional if needed.
| Characteristics | Values |
|---|---|
| Form Number | 8936 |
| Form Name | Qualified Plug-in Electric Drive Motor Vehicle Credit |
| Who can file | Owners and manufacturers of certain new electric motor vehicles |
| Tax Credit Value | Up to $7,500 |
| Applicable to | Vehicles placed in service after December 31, 2022 |
| Not Applicable to | Cars bought after December 31, 2032 |
| Requirements | Modified Adjusted Gross Income (MAGI) equal to or less than $300,000 (Married Filing Jointly and Qualifying Surviving Spouse), $225,000 (Head of Household), or $150,000 for all other filers |
| Requirements | Battery capacity of at least seven-kilowatt hours |
| Requirements | Meet the North American final assembly requirement |
| Requirements | Manufacturer-suggested retail price (MSRP) of no more than $80,000 for vans, SUVs, and pickups, and $55,000 for other vehicles |
| Notes | The credit is only applicable for the tax year in which the vehicle was purchased |
| Notes | The form must be completed with the VIN for the electric vehicle |
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What You'll Learn
Claiming the credit for a Tesla
If you have purchased a Tesla, you may be eligible for a tax credit. The amount of credit you can claim depends on the vehicle type and the year you purchased the vehicle. The credit amount can range from $1,500 to $12,000. To confirm eligibility, check the list of qualifying Tesla models on fueleconomy.gov before purchasing a Tesla.
As of 2023, Powerwall, with or without solar, qualifies for the Investment Tax Credit. Depending on your location, state and local utility incentives may be available for electric vehicles and solar systems. Most rebates can either be claimed after purchase or reflected as a reduction in the price of your purchase. Many states also offer non-cash incentives for electric vehicles, such as carpool lane access and free municipal parking.
For all qualifying used electric vehicle deliveries, eligible customers may receive a tax credit of up to $4,000, or up to 30% of the purchase price, whichever value is less. Eligible customers must meet all federal requirements, including the AGI limitations, price caps, and vehicle age. For the full list of the current requirements, review the IRS website.
To claim the credit for a Tesla purchased in 2022, file Form 8936, Clean Vehicle Credit with your 2022 tax return. You will need to provide your vehicle's VIN. If you missed claiming a credit for a Tesla purchased before 2022, you may be able to claim it by filing an amended return for the tax year when you took possession of the vehicle.
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Qualifying vehicles
To qualify for the Clean Vehicle Credit, your vehicle must be a new vehicle with at least four wheels placed in service after 2022. It must be propelled to a significant extent by an electric motor that draws electricity from a battery with a capacity of no less than seven kilowatt-hours. The battery must be capable of recharging from an external electricity source. The vehicle must also meet the North American final assembly requirement.
Additionally, the vehicle's manufacturer's suggested retail price (MSRP) must not exceed $80,000 for vans, SUVs, and pick-up trucks, and $55,000 for other vehicles. The MSRP requirement will allow the credit to be transferred to the car dealer starting in 2024.
It is important to note that the Clean Vehicle Credit does not apply to electric bikes as they typically do not meet the required mph speed.
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Reporting requirements for sellers and dealers
To claim the tax credit for purchasing an electric vehicle, buyers must fill out and submit Form 8936 with their tax returns. This form is used to calculate the tax credit for clean vehicles acquired and placed in service during the tax year. The form must be completed with the Vehicle Identification Number (VIN) for the electric vehicle.
Regarding reporting requirements for sellers and dealers, they are mandated to provide a time-of-sale report to the buyer and report specific information about the vehicle to both the buyer and the IRS. This includes details such as the vehicle's VIN and other relevant specifications. Additionally, starting in 2024, car dealers can receive a transferable tax credit of up to $3,750 each for meeting certain requirements, such as a manufacturer-suggested retail price (MSRP) cap.
It is important to note that the tax credit is not an upfront discount for the buyer. Instead, it reduces the buyer's tax liability for the year of purchase, provided they meet the eligibility criteria. The credit is designed to make purchasing an electric vehicle more financially accessible.
As for the eligibility of vehicles, they must be new, with a model year at least two years older than the calendar year in which they are acquired. The vehicle must also be propelled primarily by an electric motor powered by a battery with a capacity of at least 7 kilowatt-hours, capable of being recharged from an external electricity source. Alternatively, the vehicle may be propelled by converting chemical energy directly into electricity by combining oxygen with hydrogen fuel.
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Tax credits for two-wheeled vehicles
Tax credits for electric vehicles are available for both four- and two-wheeled vehicles. To claim a tax credit for a two-wheeled electric vehicle, you must file Form 8936: Qualified Plug-in Electric Drive Motor Vehicle Credit with your tax return. This form can be used to claim a tax credit of up to $7,500 for the purchase of a new, qualified two-wheeled plug-in electric vehicle that meets certain eligibility requirements.
To qualify for the tax credit, the two-wheeled vehicle must:
- Be capable of achieving a speed of at least 45 miles per hour.
- Be propelled primarily by an electric motor that draws electricity from a battery with a capacity of at least 2.5 kilowatt-hours.
- Be capable of recharging the battery from an external source of electricity.
- Have a gross vehicle weight rating of less than 14,000 pounds.
- Be used primarily on public roadways.
- Be purchased from a qualified manufacturer.
It is important to note that the rules and eligibility requirements for tax credits for electric vehicles can change frequently. Therefore, it is always a good idea to refer to the latest information provided by the Internal Revenue Service (IRS) and seek guidance from a tax professional.
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Clean vehicle credit
The electric vehicle tax credit, now known as the clean vehicle credit, has been expanded and updated with new rules. The clean vehicle tax credit is a nonrefundable credit meant to lower the cost of qualifying plug-in electric or other “clean” vehicles. The credit is worth between $2,500 and $7,500 for the 2022 tax year. Eligibility for claiming the credit depends on the number of electric vehicles sold by the manufacturer, the vehicle’s weight, and if you own the car.
To claim the clean vehicle tax credit, you can file Form 8936 when you file your federal income taxes. This form is used to determine your tax credit value for certain qualified two- or three-wheeled plug-in EVs. To be eligible for the credit, vehicles must have had their final assembly in North America and weigh less than 14,000 pounds. The credit can only be claimed once every three years.
Beginning with the tax year 2023, the former $7,500 credit is broken into two new credits worth up to $3,750 each for qualifying buyers of new all-electric cars, fuel cell vehicles, and hybrid plug-ins. One of the new $3,750 credits is available for meeting the critical minerals requirement, and the other is for purchasing a qualifying vehicle that meets the battery component requirement. The clean vehicle tax credit has a number of stipulations that need to be met to qualify for claiming the two-part credit on a fully electric or plug-in-hybrid electric vehicle placed in service after April 17, 2023.
As of 2024, taxpayers can choose to transfer the tax credit to an eligible dealership instead of claiming it on their tax returns the following year. This allows the dealer to lower the cost of the vehicle by the corresponding credit amount for an immediate point-of-sale discount.
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Frequently asked questions
Form 8936: Qualified Plug-in Electric Drive Motor Vehicle Credit is an IRS form for owners and manufacturers of certain new electric motor vehicles.
You can claim the EV tax credit for your qualifying electric vehicle using Form 8936. To properly fill out this form, you will need the vehicle's VIN. You can then submit it along with your taxes when you file them for the year.
The Clean Vehicle Credit applies to purchasers of an electric drive motor vehicle that meets certain specifications. The credit is worth up to $7,500 and can be claimed for vehicles placed in service after December 31, 2022, and doesn't apply to cars bought after December 31, 2032.
