Form 8936 incorrectly calculates income limit eligibility.

[liulewie]

Form 8936 incorrectly calculates income limit eligibility. 

I have the following AGI from 2022 and 2023

1. 2022 Tax Year - $200,000 as heads of households ($225,000 limit)
2. 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!

[liulewie]

Thanks  @AmyC  for looking into this for us! here is the token: 1200177

Here is my original post with more of the context and IRS links. Hope this helps!

[RachelW33]

Unfortunately, TurboTax does not support the calculation if your filing status changes between the preceding year and the current year and your preceding year income qualifies for Clean Vehicle Credits (Form 5396).  

See page 16, Credits Not Covered Elsewhere item 6: Unsupported Calculations and Situations in the 2023 TurboTax Individual Federal Tax Software Program...

[liulewie]

What do you suggest we should do in this situation? Should we file by paper and add the Form 8936 manually? (is there a way to manually override this behavior in turbotax?)

[DaveF1006]

To look at this in detail, we would like to see a diagnostic copy of your return. The information in this file is a sanitized copy meaning there is no personal information, only numbers so that we can troubleshoot in depth, check for calculation issues, and to see how certain items are applied. Here is how to order. 

For Turbo Tax online, go to tax tools>tools>share my file with agent.  When this is selected, you will receive a token number.  Respond back in this thread and tell us what that token number is. 

If you use the desktop version, go to the black stripe at the top of the program>online>send tax file to agent. Once you receive the token number, reply back in this thread and let us know what that token number is.

@liulewie