What Is a Tentative Credit From a Manufacturer’s Certification?

A tentative credit from a manufacturer’s certification is a preliminary figure for calculating certain federal tax credits. This amount is the maximum potential credit available for a specific product before any personal limitations are applied. It is most commonly associated with the Clean Vehicle Credit, where the manufacturer provides a document certifying that the vehicle meets the technical requirements set by law.

This initial credit amount is determined by attributes like a vehicle’s battery capacity or the sourcing of its components. The certification serves as official verification of these attributes for the taxpayer and the Internal Revenue Service (IRS). The final amount can be lower based on factors like your income and overall tax liability.

Understanding the Manufacturer’s Certification

A manufacturer’s certification is a document from a vehicle’s maker affirming it meets the technical qualifications for a tax credit. Its primary purpose is to provide the buyer and the IRS with verifiable proof of eligibility. This document is the evidence needed when you file your taxes to claim the credit, as the IRS may disallow it without this proof.

The buyer receives this certification from the seller at the time of purchase. The document contains the Vehicle Identification Number (VIN), the vehicle’s gross weight rating, and its battery capacity in kilowatt-hours. It also confirms the manufacturer is qualified by the IRS and includes the location of the vehicle’s final assembly, a detail required by the Inflation Reduction Act of 2022.

The seller is required to provide this information to you at the time of sale and must also report it, including your name and taxpayer identification number, directly to the IRS. If the seller fails to complete this electronic reporting, the vehicle will not be eligible for the credit. This dual-reporting system allows the IRS to cross-reference the information on your tax return with the data submitted by the seller.

Calculating the Tentative Credit Amount

The tentative credit amount is calculated using the technical specifications on the manufacturer’s certification. For the New Clean Vehicle Credit, the calculation determines the total potential credit based on whether the vehicle meets two major requirements: the critical minerals requirement and the battery components requirement. The certification provides the necessary confirmation for each of these components.

For vehicles placed in service from April 18, 2023, onward, the calculation can result in a credit up to $7,500. The tentative credit is $3,750 if the vehicle meets the critical minerals requirement and another $3,750 if it meets the battery component requirement. A vehicle meeting both requirements qualifies for the full $7,500 tentative credit, and the certification will state which standards are met.

The critical minerals rule requires that a percentage of the battery’s minerals be extracted or processed in the United States or a country with a U.S. free trade agreement. The battery components rule mandates that a percentage of the battery’s components be manufactured or assembled in North America. The manufacturer is responsible for tracking its supply chain and attesting to these facts on the certification.

This calculated figure, whether $3,750 or $7,500, represents your tentative credit. It is the amount you will carry forward to your tax return before personal limitations are considered, and the certification is the source document for this calculation.

Claiming the Credit on Your Tax Return

After calculating the tentative credit, you must claim it by filing Form 8936, Clean Vehicle Credits, with your annual tax return. You will enter vehicle information, including the VIN, directly from the certification onto the form. The tentative credit amount you previously calculated is also entered on this part of the form.

Personal limitations can reduce your credit from the tentative amount. The first limitation is based on your Modified Adjusted Gross Income (MAGI). For new clean vehicles, the credit is not available if your MAGI exceeds $300,000 for married couples filing jointly, $225,000 for heads of household, and $150,000 for all other filers. If your income is above these limits, your allowable credit is zero.

A second limitation is your total tax liability. The Clean Vehicle Credit is nonrefundable, which means it can reduce your tax liability to zero, but you cannot get any part of it back as a refund. The final credit you can claim is the lesser of your tentative credit amount or your total tax for the year. For example, if your tentative credit is $7,500 but your tax liability is only $5,000, your final credit is limited to $5,000.

The form guides you through these comparisons. You start with the potential credit from the certification, check if your income disqualifies you, and then calculate the final amount based on your tax liability. This process ensures the credit is applied correctly according to tax rules.