Question Regarding IRS 8936 Form Schedule A

[kzaccountingllc]

I'm currently working on a client's tax return and came across they purchased a Tesla in year 2024 with advance credit of $7500.  If they didn't receive this credit, then I can simply follow through the tax form and the program will automatically calculate how much EV tax credit they can received based on their income.  Now that they already transferred the $7500 EV credit as down payment to Tesla, I entered $7500 on line 4a transferred credit to dealer.  Then will I need to fill out anything else?

For example, when I entered this credit to one of my client that has itemized deduction (property tax paid and mortgage interest paid) and on 1099-NEC with around 70k income.  If they didn't transfer this $7500 credit to the dealer, then they are only qualified to receive $3455 from the calculation.  My question is because of this issue, am I missing anything on the 8936 form or schedule A which they need to pay back $7500 - $3455 = $4045 back to the IRS?

Thank You

[Just-Lisa-Now-]

I know we learned about how this works in the CEs I took late last year, but I dont remember the details, and I havent had any of these yet, so I havent needed to look it up.  Im sure the instructions for Form 8636 explain it.

[kzaccountingllc]

Thank you for your response and yes the IRS instruction form did explain to reduce the basis of line 9 by the amount of credits you received.  But when I try to enter a number on pro series, it automatically gets deleted and that's where I got confused there.

[kzaccountingllc]

I checked the IRS 8936 instruction again and it still doesn't give me a clear answer on that part.  I tried the Basis reduction on line 9, also contacted intuit technical support for why I can't enter any number on line 9 as soon as I mark line 4 yes, 7500 transfer to dealer on.  So perhaps the 8936 form isn't meant to put the EV 7500 credit advance in repayment.  I looked on the IRS official website and this is what they stated below.  If that's the case then it answered my question where my client is only suppose to receive $166 EV credit, but then he transferred $7500 to the dealer and therefore my client nor the dealer is subject to the excess EV tax recapture.  I also tried to see if I can manually enter the 8936 recapture on 1040 schedule 2, line 1b and the program won't let me override.  I guess I don't need to worry about anything as long as the EV VIN match with the IRS database as they stated below the excess credit don't need to paid back.

Q4. What if a buyer has insufficient tax liability to fully use a transferred credit? (added Oct. 6, 2023)

A4. The amount of the credit that the electing taxpayer elects to transfer to the eligible entity may exceed the electing taxpayer's regular tax liability for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture from the dealer or the buyer.