Form 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Checklist for 2020 Tax Year
Purpose
Form 8936 claims the qualified plug-in electric drive motor vehicle credit for vehicles placed in service during the 2020 tax year. This form applies to both qualified plug-in electric drive motor vehicles with four or more wheels and qualified two-wheeled plug-in electric vehicles. The credit attributable to vehicles used for business or investment purposes is treated as a general business credit. In contrast, the credit for personal use vehicles is treated as a nonrefundable personal credit.
Eligibility Requirements
Before completing Form 8936, verify your vehicle meets all qualification criteria. You must be the vehicle owner, not a lessee. The vehicle must be new, with its original use beginning with you, and manufactured primarily for use on public streets and highways, used mainly in the United States. The vehicle must have been acquired for use or lease to others, not for resale.
For four-wheeled vehicles, the vehicle must draw electricity from a battery with a capacity of at least 4 kilowatt-hours and weigh less than 14,000 pounds. For two-wheeled vehicles, the battery must have a capacity of at least 2.5 kilowatt-hours, the vehicle must achieve speeds of 45 miles per hour or greater, and it must weigh less than 14,000 pounds.
Step-by-Step Filing Instructions
Step 1: Gather Vehicle Documentation
Obtain your vehicle identification number from the vehicle registration, title, proof of insurance, or the actual vehicle. The VIN is typically 17 characters consisting of numbers and letters. Collect your purchase documentation, which should include the vehicle cost and acquisition date. Verify the year, make, and model information is accurate and complete.
Step 2: Determine Placement in Service Date
Record the exact date you placed the vehicle in service using the month, day, and year format. The placement in service date must fall within the 2020 tax year for which you are filing. This date represents when the vehicle was ready and available for its specific use, whether for personal or business purposes.
Step 3: Verify Manufacturer Certification
Confirm your vehicle appears on the IRS qualified vehicle list for the specific year, make, and model. Generally, you can rely on the manufacturer’s or domestic distributor’s certification to the IRS. The manufacturer should provide a copy of the IRS acknowledgment letter. Check the IRS website for any certification withdrawals published after your purchase date. Tentative credit amounts acknowledged by the IRS are available at IRS.gov by searching for qualified vehicles acquired after December 31, 2009.
Step 4: Enter Basic Vehicle Information
Complete lines 1 through 3 of Form 8936 Part I for each qualifying vehicle. Enter the year, make, and model on line 1. Record the complete 17-character VIN on line 2. Enter the placement in service date on line 3 in MM/DD/YYYY format. Use separate columns for each vehicle, and attach additional Forms 8936 if you have more than two vehicles.
Step 5: Calculate Line 4a Amount
For two-wheeled vehicles, enter the actual purchase cost of the car on line 4a. For four-wheeled vehicles, enter the credit amount allowable for your specific year, make, and model as certified by the manufacturer and acknowledged by the IRS. Do not enter the purchase cost for four-wheeled vehicles. The credit amount for four-wheeled vehicles varies by battery capacity and vehicle specification, as certified to the IRS.
Step 6: Determine Phase-Out Percentage
Enter the applicable phase-out percentage on line 4b. For most vehicles, enter 100 percent. However, manufacturers who have sold 200,000 or more qualified vehicles to retailers for use in the United States after 2009 are subject to phase-out. For 2020, Tesla vehicles acquired after December 31, 2019, receive zero percent credit and do not qualify.
General Motors vehicles acquired after March 31, 2020, are not eligible for zero percent credit. If you acquired a Tesla vehicle between July 1, 2019, and December 31, 2019, enter 25 percent. If you acquired a GM vehicle between October 1, 2019, and March 31, 2020, enter 25 percent.
Step 7: Calculate Tentative Credit
Multiply line 4a by line 4b and enter the result on line 4c. This is your tentative credit before applying any business use adjustments. If your vehicle was used exclusively for personal purposes, and you did not receive a credit from a partnership or S corporation, skip Part II and proceed directly to Part III. All other filers must complete Part II.
Step 8: Calculate Business Use Percentage
If you used the vehicle for both business and personal purposes, determine your business use percentage for line 5. Divide the number of miles driven for business or investment purposes by the total miles driven for all purposes. Do not include commuting mileage in business use calculations. If the vehicle is used solely for business purposes, enter 100 percent.
If you converted the vehicle from personal to business use during the year, calculate the percentage based on the number of months in business use. For example, converting to 50 percent business use for the last six months results in 25 percent annual business use.
Step 9: Apply Section 179 Deduction Adjustment
Multiply line 4c by line 5 and enter the result on line 6. This represents the business portion of your credit. For two-wheeled vehicles only, enter any Section 179 expense deduction claimed for this vehicle on line 7 from Part I of Form 4562. Subtract line 7 from line 6 and enter the result on line 8. Multiply line 8 by 10 percent and enter the result on line 9. Enter $2,500 on line 10 as the maximum credit per two-wheeled vehicle. For four-wheeled vehicles, leave lines 7 through 10 blank and proceed to line 11.
Step 10: Determine Business Credit Amount
For four-wheeled vehicles, enter the amount from line 6 on line 11. For two-wheeled cars, enter the smaller of line 9 or line 10 on line 11. Add the amounts from columns (a) and (b) on line 11 and enter the total on line 12. If you received qualified plug-in electric drive motor vehicle credits from partnerships or S corporations, enter those amounts from Schedule K-1 on line 13.
Add lines 12 and 13 to determine your total business credit on line 14. Partnerships and S corporations report this amount on Schedule K and stop here. All other taxpayers report this amount on Form 3800, Part III, line 1y.
Step 11: Calculate Personal Use Credit
Complete Part III if any portion of the vehicle was used for personal purposes. If you skipped Part II entirely, enter the amount from line 4c on line 15. If you completed Part II, subtract line 6 from line 4c and enter the result on line 15. For two-wheeled vehicles, multiply line 15 by 10 percent and enter the result on line 16. If you skipped Part II, enter $2,500 on line 17. If you completed Part II, subtract line 11 from line 10 and enter the result on line 17. For four-wheeled vehicles, leave lines 16 and 17 blank.
Step 12: Finalize Personal Credit Calculation
For four-wheeled vehicles, enter the amount from line 15 on line 18. For two-wheeled cars, enter the smaller of line 16 or line 17 on line 18. Add the amounts from columns (a) and (b) on line 18 and enter the total on line 19. This represents your total personal use credit before applying tax liability limitations.
Step 13: Apply Tax Liability Limitation
Enter the amount from Form 1040, 1040-SR, or 1040-NR line 18 on Form 8936 line 20. This is your tax liability before credits. On line 21, enter the total of personal credits from Schedule 3 lines 1 through 4, plus amounts from Form 5695 line 30, Form 8910 line 15, and Schedule R line 22 if applicable. Subtract line 21 from line 20 and enter the result on line 22. This represents your remaining tax liability available for the plug-in electric vehicle credit.
Step 14: Report Personal Credit on Tax Return
Enter the smaller of line 19 or line 22 on Form 8936 line 23. This is your allowable personal use credit. Transfer this amount to Schedule 3 (Form 1040), line 6. On Schedule 3, line 6, indicate which form the credit comes from by entering “8936” in the appropriate space. If line 22 is smaller than line 19, you cannot use the full credit amount. The unused personal portion of the credit cannot be carried back or forward to other tax years and is permanently lost.
Step 15: Reduce Vehicle Basis and Attach Forms
Unless you elect not to claim the credit, reduce the basis of each vehicle by the sum of the amounts entered on Form 8936 lines 11 and 18 for that vehicle. This basis reduction affects future depreciation calculations for business vehicles and capital gain calculations upon sale. Attach Form 8936 to your Form 1040, 1040-SR, or 1040-NR when filing. Verify that Schedule 3 properly reflects the credit transfer on line 6 and that the total from Schedule 3 line 7 is correctly reported on Form 1040 line 20.
Important Considerations for 2020
The January 2021 revision of Form 8936 applies to tax years beginning in 2020 or later until a subsequent revision is issued. Use prior form revisions for earlier tax years. The credit for qualified two-wheeled plug-in electric vehicles expired for vehicles acquired after 201. Still, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended the credit to cover two-wheeled cars acquired in 2021. If you acquired a two-wheeled vehicle in 2017 but placed it in service during 2020, you may still claim the credit for the 2020 tax year.
Vehicles that qualify for the plug-in electric vehicle credit on Form 8936 cannot be used to claim the alternative motor vehicle credit on Form 8910. You must choose between these credits if your vehicle qualifies for both. If you are a seller of a qualified vehicle to a tax-exempt organization, governmental unit, or foreign person, special rules apply. You may claim the credit if you clearly disclose the tentative credit amount in writing to the purchaser, treat the vehicle as business property, and reduce your cost of goods sold by the credit amount.
If your vehicle no longer qualifies for the credit after you have claimed it, you may be required to recapture part or all of the credit. Review Section 30D(f)(5) of the Internal Revenue Code for recapture rules. Keep all documentation supporting your credit claim, including the manufacturer’s certification letter, purchase agreement, VIN documentation, and mileage records for business use calculations. These records must be retained as long as they may become material in the administration of any Internal Revenue law.
Filing Tips
Partnerships and S corporations must file Form 8936 to claim the credit for business vehicles. Individual taxpayers who receive the credit solely through a partnership or S corporation allocation are not required to complete Form 8936. Instead, they may report the credit directly on Form 3800, Part III, line 1y using the amount from Schedule K-1.
Complete a separate Form 8936 or use additional columns if you placed more than two qualifying vehicles in service during the tax year—total all vehicles on lines 12 and 19 when combining multiple forms.
The personal use portion of the credit is nonrefundable and cannot exceed your tax liability after other personal credits. Plan your tax withholding or estimated payments accordingly, as any unused personal credit cannot be carried to future years. For business vehicles, the credit is reported on Form 3800 and may have different rules and options for carrying it forward compared to general business credits. Consult the Form 3800 instructions for guidance on business credit limitations and carry-forward calculations.
Verify your vehicle’s eligibility on the IRS website before completing Form 8936. The IRS maintains updated lists of qualified vehicles at IRS.gov/Form8936 and provides the latest information about manufacturer phase-outs, certification withdrawals, and credit amounts. Phase-out information is published in IRS notices when manufacturers reach the 200,000-vehicle sales threshold, and the phase-out begins in the second calendar quarter following the quarter in which the threshold was met.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
