Form 8936 incorrectly calculates income limit eligibility.
I have the following AGI from 2022 and 2023
- 2022 Tax Year - $200,000 as heads of households ($225,000 limit)
- 2023 Tax Year - $250,000 as single ($150,000 limit)
Based on the IRS language below, I am qualified for the credit with 2022 AGI and Filing Status. However, currently TurboTax uses my 2022 AGI ($200,000) and compare it against the 2023 Filing Status (Single $150,000), instead of the 2022 Filing Status (Head of household $225,000) and does not allow me to claim the credit. This is incorrect (see IRS clarification below)
In addition, your modified adjusted gross income (AGI) may not exceed:
$300,000 for married couples filing jointly
$225,000 for heads of households
$150,000 for all other filers
You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. If your modified AGI is below the threshold in 1 of the two years, you can claim the credit.
I've found some clarifications from IRS about filing status changes on determine income level. It states that the income level should be compared against the filing status of the corresponding year (preceding or current). i.e. we should be able to specify the filing status of for the previous year, if different from the current filing status. (see last line below)
Q1. Could my income level prevent me from taking the New Clean Vehicle Credit? (updated Oct. 6, 2023) A1.
Yes. You may not claim the credit if your modified adjusted gross income (AGI) exceeds certain thresholds. This limitation is based on the lesser of your modified AGI for the yearthat the new clean vehicle was placed in service orforthe preceding year. The relevant modified AGI thresholds are as follows: • Married filing jointly or filing as a qualifying surviving spouse or a qualifying widow(er) - $300,000 • Head of household - $225,000 • All other taxpayers - $150,000 Your modified AGI is the amount from line 11 of your Form 1040 plus: • Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. • Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa. If your filing status changes between the preceding year and the current year, you may claim the New Clean Vehicle Credit if your modified AGI is less than or equal to the threshold applicable to your filing status for in the preceding year or current year.
Source: https://www.irs.gov/pub/taxpros/fs-2023-29.pdf#page=5
Based on the community threads, this is a common issue and impacting large number of customers, some of whom may have been incorrectly disqualified and already filed the tax.
Please prioritize this issue and minimize the impact to TurboTax customers!
