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US Treasury broadened their definition of SUVs to include more vehicles, allowing more models from Tesla and other carmakers to qualify for EV tax credits.
Treasury Updates Vehicle Classification Standard for Clean Vehicle Tax Credits Under Inflation Reduction Act
WASHINGTON—Today, the U.S. Treasury Department updated the vehicle classification standard used to determine the applicable Manufacturer Suggested Retail Price (MSRP) limitation for clean vehicle tax credits available under the Inflation Reduction Act.
On December 29, 2022, Treasury published a notice of intent to propose regulations containing information for consumers and manufacturers in advance of the January 1, 2023, effective date of changes to the clean vehicle credit under section 30D of the tax code. The notice of intent provided an expected vehicle classification standard, based on existing EPA CAFE standards, for the purpose of determining whether the vehicle is a sedan, SUV, or other type of vehicle and subject to the $55,000 or $80,000 MSRP limitation.
To make it easier for consumers to know which vehicles qualify under the applicable MSRP cap, Treasury is updating the vehicle classification standard to use the consumer-facing EPA Fuel Economy Labeling standard, rather than the EPA CAFE standard. This change will allow crossover vehicles that share similar features to be treated consistently. It will also align vehicle classifications under the clean vehicle credit with the classification displayed on the vehicle label and on the consumer-facing website FuelEconomy.gov.
Customers who have purchased and placed in service vehicles since January 1, 2023, that qualify under the EPA Fuel Economy Labeling classification standard announced today and who satisfy the other clean vehicle tax credit requirements can claim the credit, including customers with vehicles that did not qualify under the prior EPA CAFE standard.
All vehicles that were eligible under the MSRP limitations prior to today’s notice remain eligible under the updated standard. Updated information about the MSRP limit that applies has been posted to IRS.gov.
As outlined in December, subsequent guidance on critical minerals and batteries will be issued in March.