If you purchased an electric or plug-in hybrid vehicle in 2021, you could qualify for a federal tax credit of up to $7,500 under Form 8936. This IRS form calculates and claims the Qualified Plug-in Electric Drive Motor Vehicle Credit, rewarding taxpayers who invested in cleaner vehicle technology.

What the Form Is For

Form 8936 allows individuals and businesses to claim the federal credit for qualified plug-in electric drive motor vehicles placed in service during 2021. The credit applied to:

• Four-wheeled plug-in electric vehicles — fully electric or plug-in hybrids with at least a 4 kWh battery.
• Certain two-wheeled plug-in electric vehicles — acquired in 2021 or earlier, with at least a 2.5 kWh battery.

How the Credit Was Calculated

For four-wheeled vehicles:

• Base credit: $2,917 for the first 5 kWh of battery capacity.
• Plus: $417 for each additional kWh over 5 kWh.
• Maximum: $7,500 total.

For two-wheeled plug-in vehicles:

• 10% of the purchase price, up to $2,500.

This credit could be split between personal and business use:

• Personal-use portion: Appeared directly on your individual return (Form 1040, Schedule 3).
• Business-use portion: Became part of your general business credit on Form 3800.

When You’d Use This Form (Including Late or Amended Filings)

You must file Form 8936 with the return for the year the vehicle was placed in service—meaning when you took delivery and began using it.

For example:

• If you bought and started driving your EV in 2021, attach Form 8936 to your 2021 return (due April 2022).

Late or Amended Filings

If you forgot to claim the credit:

• File Form 1040-X to amend your 2021 return and include Form 8936.
• You generally have three years from your original filing date or two years from when you paid the tax—whichever is later.
• For most taxpayers, that means until April 2025 to claim the 2021 credit.

Attach:

• Proof of purchase, and
• The vehicle’s VIN.

Key Rules for 2021

Vehicle Requirements

To qualify, the vehicle must have been:

• New (original use began with you);
• Equipped with a battery capacity of at least 4 kWh (2.5 kWh for eligible two-wheelers);
• Rechargeable from an external source;
• Primarily used in the U.S., and
• Under 14,000 pounds in gross vehicle weight.

Ownership

• Only the vehicle owner could claim the credit.
• Leases didn’t qualify for lessees — only the leasing company could claim it.
• The vehicle had to be acquired for use or lease, not resale.

Manufacturer Phase-Out

Once a manufacturer sold 200,000 qualifying vehicles, credits phased out:

• Tesla: Phase-out ended December 31, 2019 (no credit for 2021).
• General Motors (Chevrolet, Cadillac): Phase-out ended March 31, 2020 (no credit for 2021).

So, Tesla Model 3s and Chevy Bolts purchased in 2021 didn’t qualify for the credit.

Certification

Manufacturers certified each model’s eligibility with the IRS. You needed to rely on that certification for the correct credit amount.

Basis Reduction

You had to reduce your vehicle’s cost basis (for depreciation or gain purposes) by the credit amount claimed.

Step-by-Step Guide

Step 1: Gather Documentation

You’ll need:

• VIN (from registration or title)
• Purchase and delivery date
• Make, model, and battery capacity
• Manufacturer’s certification letter

Step 2: Complete Part I – Tentative Credit

• Enter vehicle details on lines 1–3.
• On line 4a, input the credit amount per manufacturer’s certification.
• On line 4b, apply the phase-out percentage (100% for most, 0% for Tesla/GM).
• Multiply to find your tentative credit.

Step 3: Complete Part II – Business/Investment Use (If Applicable)

• Determine your business-use percentage (business miles ÷ total miles).
• Multiply by your tentative credit.
• Transfer business credit to Form 3800 (General Business Credit).

Step 4: Complete Part III – Personal Use

• The remainder applies to personal use.
• This portion directly reduces your tax liability (non-refundable).

Step 5: Transfer to Tax Return

• Personal credit → Schedule 3 (Form 1040), line 6 (“8936”).
• Business credit → Form 3800, line 1y.

Common Mistakes and How to Avoid Them

What Happens After You File

• Reduces tax due, dollar-for-dollar.
  • Example: $5,000 credit reduces $8,000 tax bill to $3,000.
• Non-refundable for personal use. If your total tax liability is less than the credit, the excess is lost.
• Business-use portion may carry forward up to 20 years or back 1 year under Form 3800 rules.

The IRS may request:

• Purchase records,
• Manufacturer certification, or
• Proof the vehicle was placed in service in 2021.

Keep all documentation for at least three years.

If a manufacturer’s certification is later withdrawn, the IRS won’t penalize you if you relied on it in good faith.

Frequently Asked Questions

1. Can I claim the credit for a used EV in 2021?
No. Only new vehicles qualified. The used clean vehicle credit started in 2023.

2. I use my EV half for business, half for personal use—what now?
Split the credit 50/50. The business half goes to Form 3800; the personal half to Schedule 3.

3. Can I also claim the alternative motor vehicle credit (Form 8910)?
No. You must choose one.

4. I bought the car in one state but registered it in another. Does that matter?
No. As long as it’s primarily used in the U.S., it qualifies.

5. What if I sell my EV soon after claiming the credit?
Normal sales don’t trigger recapture, but converting it to non-U.S. use might.

6. Can partnerships and S corps claim this credit?
Yes. The entity files Form 8936, then passes the credit to partners/shareholders via Schedule K-1.

7. Are there income limits for 2021?
No. Income limits were introduced after 2022 under the Inflation Reduction Act.

Sources

• IRS Form 8936 (Rev. January 2021)
• IRS Instructions for Form 8936 (Rev. January 2021)
• IRS: Credits for New Electric Vehicles Purchased in 2022 or Before

Summary:
Form 8936 for 2021 let taxpayers claim up to $7,500 for new plug-in electric vehicles. The form covered both personal and business use, had no income limits, and excluded manufacturers like Tesla and GM due to phase-outs. If you missed the credit, you still have until April 2025 to file an amended return and claim it.

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