What the Form Is For

Form 8936 is the IRS tax form that lets you claim a federal tax credit if you bought a qualified plug-in electric vehicle in 2020. Think of it as the government's way of rewarding you for choosing an environmentally friendly car by reducing your tax bill. The credit can be worth anywhere from a few hundred dollars up to $7,500, depending on your vehicle's battery capacity.

The form applies to two types of electric vehicles purchased in 2020:

• Four-wheeled vehicles (cars, SUVs, trucks) with batteries of at least 4 kilowatt hours (kWh)
• Two-wheeled vehicles (electric motorcycles) with batteries of at least 2.5 kWh that can reach speeds of 45 mph or greater

This is a nonrefundable credit, meaning it can reduce your tax bill to zero, but you won't get a refund for any unused portion. If you owe $5,000 in taxes and qualify for a $7,500 credit, you'll only benefit from $5,000 of it—the extra $2,500 doesn't get refunded to you or carried forward to next year.

When You'd Use It (Late/Amended Filing)

You should file Form 8936 with your 2020 tax return (Form 1040) if you placed a qualified electric vehicle in service during calendar year 2020. "Placed in service" simply means the date you started using the vehicle—typically your delivery or purchase date.

Filing a late or amended return: If you forgot to claim this credit on your original 2020 return, you can file an amended return using Form 1040-X to claim the credit retroactively. According to IRS guidance, you generally have three years from the original filing deadline to amend your return. If you miss this deadline, the credit is lost—it cannot be carried forward or backward to other tax years, and any unused personal portion of the credit cannot be carried to other years.

Key Rules for 2020

Vehicle Requirements

• Must be brand new (original use begins with you)
• Must have been purchased for your own use, not for resale
• Must be used primarily in the United States
• Must weigh less than 14,000 pounds (gross vehicle weight)
• Must be capable of being recharged from an external source of electricity
• Must be manufactured primarily for use on public streets, roads, and highways

Credit Amount Calculation

• Four-wheeled vehicles: The credit equals $2,917 for vehicles with at least 5 kWh of battery capacity, plus $417 for each kWh of capacity over 5 kWh. The maximum credit is $7,500.
• Two-wheeled vehicles: The credit is 10% of the vehicle's cost, up to a maximum of $2,500.

Manufacturer Phase-Out Rules (Critical for 2020)

The credit phases out once a manufacturer sells 200,000 qualifying vehicles in the United States. The phaseout begins in the second calendar quarter after the quarter in which the 200,000th vehicle was sold. Then the phaseout allows 50% of the full credit for 2 quarters, 25% of the full credit for 2 additional quarters, and no credit thereafter.

In 2020, two major manufacturers were affected:

• Tesla vehicles: According to IRS Notice 2018-96, if you acquired a Tesla between July 1 and December 31, 2019, you could claim 25% of the credit. If you acquired a Tesla on or after January 1, 2020, the credit is 0%—no credit is available for Tesla vehicles acquired after December 31, 2019.
• General Motors vehicles (including Chevrolet Bolt): According to IRS Notice 2019-22, if you acquired a GM electric vehicle between October 1, 2019 and March 31, 2020, you could claim 25% of the credit. If you acquired a GM vehicle on or after April 1, 2020, the credit is 0%—no credit is available for General Motors vehicles acquired after March 31, 2020.

Most other manufacturers had not reached the phase-out threshold in 2020, so their vehicles qualified for 100% of the credit.

Business vs. Personal Use

The form distinguishes between vehicles used for business or investment purposes and those used personally. The credit attributable to depreciable property (business/investment use) is treated as a general business credit. Any credit not attributable to depreciable property is treated as a personal credit. If you use the vehicle for both, you'll need to calculate the percentage of business use based on mileage.

Leased Vehicles

If the vehicle is leased, only the lessor (leasing company), not the lessee, is entitled to the credit.

Step-by-Step (High Level)

Here's how to complete Form 8936 in plain English:

Step 1: Gather Your Information

Before you start, collect your vehicle's information: year, make, model, Vehicle Identification Number (VIN), purchase date, and the date you placed it in service. You'll also need the credit amount—you can generally rely on the manufacturer's (or domestic distributor's) certification to the IRS. The manufacturer should be able to provide you with a copy of the IRS letter acknowledging the certification of the vehicle. The VIN can be obtained from the registration, title, proof of insurance, or the actual vehicle—it's generally 17 characters made up of numbers and letters.

Step 2: Complete Part I – Tentative Credit

List each vehicle's year, make, and model (line 1), VIN (line 2), and the date placed in service (line 3). On line 4a, for two-wheeled vehicles, enter the cost of the vehicle. For vehicles with at least four wheels, enter the credit allowable for your vehicle based on manufacturer certification. On line 4b, enter the phase-out percentage: 100% unless the vehicle was manufactured by Tesla or General Motors (25% or 0% depending on acquisition date as described above). Line 4c calculates your tentative credit.

Step 3: Determine Business vs. Personal Use

If you did NOT use your vehicle for business or investment purposes and did not have a credit from a partnership or S corporation, skip Part II and go to Part III. All others must complete Part II.

Step 4: Complete Part II – Business/Investment Credit (if applicable)

On line 5, enter the percentage of business/investment use. Enter 100% if the vehicle is used solely for business purposes. If used for both business and personal purposes, determine the percentage by dividing the number of miles driven for business purposes or for the production of income (not including commuting mileage) by the total number of miles driven for all purposes. Complete the remaining lines following the form instructions. Line 14 reports the business/investment portion, which partnerships and S corporations report on Schedule K, and all others report on Form 3800, Part III, line 1y.

Step 5: Complete Part III – Personal Use Credit

If you skipped Part II, enter the amount from line 4c on line 15. If you completed Part II, subtract line 6 from line 4c and enter on line 15. For vehicles with four or more wheels, skip lines 16 and 17 and enter the line 15 amount on line 18. For two-wheeled vehicles, complete the additional calculations for the $2,500 cap. Line 19 totals your personal-use credit.

Complete lines 20-22 to determine how much credit you can actually claim based on your tax liability. Line 23 shows your allowable personal use credit—enter the smaller of line 19 or line 22 on Schedule 3 (Form 1040), line 6, checking box c and entering "8936."

Step 6: Attach to Your Tax Return

Include completed Form 8936 with your Form 1040 when you file. Keep all supporting documentation with your tax records.

Common Mistakes and How to Avoid Them

Mistake #1: Not checking the manufacturer phase-out status

Many taxpayers assume they automatically qualify because they bought an electric vehicle, without checking whether their manufacturer had already hit the 200,000-vehicle threshold. Solution: For 2020, remember that Tesla vehicles acquired on or after January 1, 2020 receive 0% credit, and GM vehicles acquired on or after April 1, 2020 receive 0% credit. Enter the correct phase-out percentage on line 4b.

Mistake #2: Claiming the credit for a used or leased vehicle

The credit only applies when original use begins with you (brand-new vehicles), and you must be the owner, not a lessee. Solution: Verify that you purchased (not leased) a new vehicle where original use began with you.

Mistake #3: Forgetting about the nonrefundable nature

Since this is a nonrefundable credit, any personal-use credit amount exceeding your tax liability is lost forever and cannot be carried forward. Solution: Calculate your actual tax liability (line 18 on Form 1040) to see how much credit you can use. The form requires you to enter the smaller of your calculated credit or your available tax liability.

Mistake #4: Incorrect VIN entry

The IRS uses your Vehicle Identification Number to verify eligibility. A wrong VIN could cause processing issues. Solution: Double-check your VIN against your vehicle registration or title—it should be exactly 17 characters.

Mistake #5: Miscalculating business-use percentage

If you use your vehicle for both business and personal purposes, you must accurately calculate the percentage. Commuting miles do NOT count as business use. Solution: Calculate business/investment use by dividing business/investment miles (excluding commuting) by total miles driven for all purposes.

Mistake #6: Confusing with other vehicle credits

Form 8936 is specifically for qualified plug-in electric drive motor vehicles. Other alternative motor vehicles use Form 8910. Solution: Use the correct form for your vehicle type—the same vehicle cannot be claimed on both forms.

Mistake #7: Not reducing basis

Unless you elect not to claim the credit, you must reduce the basis of each vehicle by the sum of the amounts entered on lines 11 and 18 for that vehicle. Solution: Track this basis reduction for future tax purposes, especially if you later sell the vehicle or claim depreciation.

What Happens After You File

Once you file your 2020 tax return with Form 8936 attached, here's what to expect:

Processing

The IRS will process your return and verify your claim. They may request additional documentation to verify your vehicle's eligibility, such as purchase contracts, manufacturer certification letters, or mileage logs if you claimed business use.

How the Credit Reduces Your Tax

For the personal-use portion (Part III), the credit directly reduces your tax liability, which you report on Schedule 3 (Form 1040), line 6. For business/investment portions (Part II), partnerships and S corporations report the credit on Schedule K, and all other filers report it on Form 3800, Part III, line 1y.

No Carryover

Any unused personal portion of the credit is lost—it cannot be carried back or forward to other tax years. Once your 2020 return is processed, that's your final credit for that vehicle.

Potential Recapture

If the vehicle later no longer qualifies for the credit, you may have to recapture (pay back) part or all of the credit. This is covered under Internal Revenue Code Section 30D(f)(5).

IRS Notices

If the IRS identifies an issue with your Form 8936, you'll receive a notice explaining the problem. You may need to provide additional information or accept an adjustment to your credit amount within the timeframe specified in the notice.

FAQs

Q1: I bought my Tesla in December 2019 but didn't take delivery until January 2020. Can I claim the credit?

No. For Tesla vehicles, the phase-out percentage is 0% for vehicles acquired after December 31, 2019. The acquisition date (when you take delivery and place the vehicle in service) determines eligibility, not your purchase contract date. Since you took delivery in 2020, the phase-out percentage is 0%, meaning no credit is available.

Q2: Can I claim this credit if I financed the vehicle rather than paying cash?

Yes. The credit applies regardless of how you paid for the vehicle—cash, financing, or a combination—as long as you purchased the vehicle for your own use. However, if you leased the vehicle, only the lessor (leasing company) can claim the credit.

Q3: What if my electric vehicle manufacturer goes out of business? Can I still claim the credit?

Yes, as long as the vehicle was certified as qualifying by the IRS before you purchased it and you placed it in service during 2020. You can generally rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit.

Q4: I use my electric vehicle 50% for business and 50% for personal use. How do I split the credit?

You'll complete both Part II and Part III of Form 8936. Enter 50% on line 5 (business/investment use percentage), which calculates the business portion reported on Form 3800. Part III then calculates the personal portion (line 15 subtracts line 6 from line 4c), which is limited by your personal tax liability on Schedule 3. Maintain detailed mileage records to support your calculation—divide business/investment miles (excluding commuting) by total miles.

Q5: I bought a used Nissan Leaf in 2020. Can I claim the credit?

No. The vehicle must be new, with original use beginning with you. Used electric vehicles do not qualify for Form 8936.

Q6: Can married couples filing jointly claim two credits if we each bought an electric vehicle?

Yes. There's no limit on the number of credits you can claim per tax return, as long as each vehicle meets the qualifying requirements. Use separate columns on Form 8936 for each vehicle (the form provides columns for Vehicle 1 and Vehicle 2), and if you need more columns, use additional Forms 8936 and include the totals on lines 12 and 19.

Q7: I forgot to claim this credit on my 2020 return. What should I do?

File an amended return using Form 1040-X. Attach Form 8936 showing your calculation and any supporting documentation. According to IRS instructions, you generally have three years from the original filing deadline to amend your return and claim the credit.

Sources: All information in this guide comes from official IRS publications:
Form 8936 (Rev. January 2021) - IRS.gov
Instructions for Form 8936 (Rev. January 2021) - IRS.gov
Credits for New Electric Vehicles Purchased in 2022 or Before - IRS.gov

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