If you purchased an electric or plug-in hybrid vehicle in 2021, you may have wondered how to claim your federal tax credit. Form 8936 is the IRS document that makes this possible, potentially putting up to $7,500 back in your pocket. Here's everything you need to know about this form in plain English.

What Form 8936 Is For

Form 8936 is used to calculate and claim the federal tax credit for qualified plug-in electric drive motor vehicles (those with at least four wheels) and certain two-wheeled plug-in electric vehicles you placed in service during 2021. This credit was designed to encourage Americans to purchase cleaner, more fuel-efficient vehicles by reducing the overall tax burden for qualifying vehicle owners.

The credit amount depends on your vehicle's battery capacity:

• Four-wheeled vehicles: Base credit of $2,917 for vehicles with at least 5 kilowatt hours (kWh) of battery capacity, plus $417 for each kWh beyond 5 kWh, up to a maximum credit of $7,500.
• Two-wheeled vehicles: Credit equals 10% of the vehicle's cost, capped at $2,500.
  Source: IRS Instructions for Form 8936 (Rev. January 2021).

The form handles both personal use vehicles and those used for business or investment purposes, calculating the credit separately for each use category.

If you used your electric vehicle for business, that portion of the credit flows to your general business credit on Form 3800, while personal-use portions appear directly on your individual tax return.

When You’d Use Form 8936 (Including Late or Amended Filings)

You must file Form 8936 with your tax return for the year in which you placed the vehicle in service—typically the year you took delivery and started using it. If you bought and started driving your electric vehicle in 2021, you would file Form 8936 with your 2021 tax return, which was due in April 2022.

Filing Late or Amending a Return

Missed the deadline? Don’t worry—you're not necessarily out of luck. If you forgot to claim this credit on your original 2021 return, you can file an amended return using Form 1040-X to claim it retroactively.

You generally have three years from the date you filed your original return (or two years from when you paid the tax, whichever is later) to amend and claim the credit.
For most 2021 filers, this means you have until April 2025 to amend your 2021 return.

When filing late or amending, attach Form 8936 to Form 1040-X and include all required documentation, including your vehicle identification number (VIN) and proof of purchase.

Key Rules for 2021

Several important rules determined whether you could claim this credit in 2021.

Vehicle Requirements

• Must be new (original use begins with you).
• Must have at least four wheels and a battery capacity of 4 kWh or more (or 2.5 kWh for two-wheeled vehicles).
• Must weigh less than 14,000 pounds, be capable of recharging from an external source, and be manufactured for public road use.
• Must be used primarily in the U.S.

Ownership Matters

Only the vehicle owner can claim the credit. If you leased the vehicle, the leasing company—not you—claims the credit.
You must also have acquired the vehicle for your own use or to lease to others, not for immediate resale.

Manufacturer Phase-Out

This is critical. Once a manufacturer sold 200,000 qualifying vehicles, the credit began phasing out for that manufacturer.

• In 2021, Tesla and General Motors vehicles were completely ineligible.
  • Tesla phase-out ended December 31, 2019.
  • GM phase-out ended March 31, 2020.

Thus, Tesla Model 3 and Chevrolet Bolt EV purchases in 2021 received no credit.

Certification Required

You must rely on the manufacturer's certification to the IRS confirming that your specific make, model, and model year qualifies. The manufacturer should provide documentation confirming eligibility and the credit amount.

Basis Reduction

Unless you elect not to claim the credit, you must reduce your vehicle’s tax basis by the credit amount. This affects future depreciation if you use the vehicle for business.

Step-by-Step Process (High Level)

Here’s how to complete Form 8936.

Step 1 – Gather Information

Collect your vehicle’s VIN, purchase date, make and model, battery capacity, and the manufacturer’s certification letter confirming the credit amount.

Step 2 – Complete Part I (Tentative Credit)

• Enter your vehicle’s details on lines 1–3.
• On line 4a, enter the allowable credit amount (based on battery capacity).
• On line 4b, enter the phase-out percentage (100% for most manufacturers in 2021, but 0% for Tesla and GM).
• Multiply for your tentative credit.

Step 3 – Complete Part II (Business Use) if Applicable

• Calculate the business-use percentage by dividing business miles by total miles.
• For two-wheeled vehicles, subtract any Section 179 deduction and apply the 10% rate (cap: $2,500).
• Transfer business credits to Form 3800.

Step 4 – Complete Part III (Personal Use)

Calculate any remaining personal-use credit.
This portion reduces your tax liability directly but cannot exceed your total tax after other credits.
Unused personal credits cannot be carried forward or back.

Step 5 – Transfer Amounts to Your Tax Return

• Report business credits on Form 3800, line 1y.
• Report personal credits on Schedule 3 (Form 1040), line 6, checking box (c) and writing “8936.”

Common Mistakes and How to Avoid Them

Mistake #1: Claiming Credit for Ineligible Manufacturers

Many taxpayers assumed all EVs qualified, not realizing Tesla and GM vehicles in 2021 were ineligible.

Solution: Check the IRS manufacturer phase-out list before purchasing or filing.

Mistake #2: Lessees Claiming the Credit

Only vehicle owners can claim the credit—not lessees.

Solution: Verify that you hold the vehicle title, not just a lease agreement.

Mistake #3: Missing VIN Information

The VIN is required on Form 8936, line 2.

Solution: Double-check your VIN matches your registration exactly.

Mistake #4: Incorrect Business-Use Percentage

Some taxpayers estimate instead of tracking mileage.

Solution: Keep a mileage log showing business versus personal use.

Mistake #5: Forgetting to Reduce Basis

Failing to reduce your vehicle’s basis can lead to incorrect depreciation.

Solution: Adjust your depreciation records right after claiming the credit.

What Happens After You File

Once you file Form 8936 with your return, the credit reduces your tax liability dollar-for-dollar.

Example:
If you claimed $5,000 and owed $8,000, your tax bill drops to $3,000.

Note: The credit is non-refundable for personal use—if your total tax liability is less than the credit, you lose the unused portion.

IRS Review and Documentation

The IRS may request documentation such as:

• Manufacturer’s certification letter
• Purchase agreement
• Proof that the vehicle was placed in service during 2021

Keep these records for at least three years.

If the IRS later withdraws a manufacturer’s certification, you’re protected if you relied on it before the withdrawal announcement.

Business Credit Carryovers

For business-use vehicles, unused credits follow general business credit rules and can:

• Carry back one year, or
• Carry forward up to 20 years.

FAQs

Can I claim the credit if I bought a used electric vehicle in 2021?

No. In 2021, the credit only applied to new vehicles where you were the original owner. The used clean vehicle credit began in 2023 under the Inflation Reduction Act.

What if I use my electric vehicle 50% for business and 50% for personal use?

You would split the credit accordingly:

• 50% business → Form 3800 (general business credit)
• 50% personal → Schedule 3 (Form 1040)

Each portion has different carryover rules.

Can I claim both Form 8936 and the alternative motor vehicle credit (Form 8910)?

No. You cannot claim both credits for the same vehicle. You must choose one.

Does the credit apply if I buy an electric vehicle in one state and register it in another?

Yes. As long as the vehicle is primarily used in the U.S., your state of purchase or registration doesn’t affect eligibility.

What happens if I sell my electric vehicle within a few years of claiming the credit?

You may need to recapture (repay) part of the credit if the vehicle stops qualifying—for instance, if it’s no longer used mainly in the U.S.
Normal resale does not trigger recapture.

Can partnerships or S corporations claim this credit?

Yes. Partnerships and S corporations can file Form 8936 and pass the credit through to partners or shareholders via Schedule K-1.

Is there an income limit for claiming this credit in 2021?

No. The 2021 version of Form 8936 had no income limits. Income restrictions were added in 2022 and later under the Inflation Reduction Act.

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