The clean vehicle credit process looks different this tax season. With the option to transfer credits directly to the dealer, new reconciliation steps are required on your client’s return. Understanding how to report the credit and navigate Form 8936 will help prevent filing issues and ensure accurate tax reporting.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their corresponding answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.
Q: Is Form 15400, Clean Vehicle Seller Report, required if the buyer transfers the credit to the dealer?
A: Yes, Form 15400 is required when the buyer transfers either the clean vehicle credit or previously used clean vehicle credit. Publication 5905 (Rev. 1-25) contains details of the process.
Q: Is there a way to claim the credit if the taxpayer does not receive the seller report?
A: No, the report is used to verify the purchase and eligibility of the vehicle and purchaser. The instructions state: “If you elected to transfer the credit to the dealer, you are required to reconcile the Clean Vehicle Credit on your income tax return for the year the vehicle is placed in service.” Reconciliation cannot occur without the report, and the credit is not valid.
Q: Can a married couple split the credit if they file married filing separately (MFS)?
A: No, the credit is only available to the vehicle buyer whose name is on the seller report, and whose identification number is also listed there. The credit cannot be split.
Q: If the credit is passed to the dealer and if, after reconciling the credit, the taxpayer does not qualify, is there a repayment obligation?
A: Yes, if upon reconciliation on Form 8936, Clean Vehicle Credit, the credit qualifications are not met, the disqualified portion will be added to the taxpayer’s tax liability as if it was never reduced or they never received the price reduction on the vehicle.
Q: What if a buyer has insufficient tax liability to fully use a transferred credit?
A: The credit can be used only to the extent that the taxpayer has a tax liability to absorb it; it is not carried over into future years. Unused credit amounts are lost.
To learn more about reconciling clean vehicle credits, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.