The Internal Revenue Service (IRS) modified the regulatory definition of a sport utility vehicle (SUV) to make more vehicles eligible for an electric vehicle (EV) tax credit of up to $7,500.
The Inflation Reduction Act (IRA) made SUVs priced at up to $80,000 eligible for the EV tax credit, while cars, sedans, and wagons could only qualify if they were priced at up to $55,000.
The changes mean vehicles that automakers consider crossover SUVs now qualify for the credit.
“Some vehicles that were previously subject to the $55,000 MSRP limitation are now classified as SUVs and therefore get the benefit of the $80,000 MSRP limitation,” the IRS said in a statement, referring to the manufacturer’s suggested retail price (MSRP), not the actual price paid.
“A very good decision that clears up some EV tax credit confusion and instantly helps customers shopping today (and tomorrow) for an electric crossover or SUV,” said John Bozzella, president and CEO of Alliance for Automotive Innovation, in a statement.
Tesla CEO Elon Musk complained in January that tax rules for EVs were “messed up,” with the five-seat version of Tesla’s Model Y not considered an SUV but the seven-seat version considered as one.
The new rules have introduced consistency, making both Tesla models SUVs for purposes of the tax credit.
Details
The IRS and Treasury Department have revised the vehicle classification standard to use the consumer-friendly Environmental Protection Agency (EPA) Fuel Economy Labeling standard instead of the EPA CAFE standard, making it simpler for consumers to identify vehicles that meet the MSRP cap requirements.Vehicles whose class includes “sports utility vehicle,” “pickup truck,” or “van” on the fuel economy label or on FuelEconomy.gov are considered an SUV, pickup truck, or van, respectively, for the purpose of EV tax credits.
- small sport utility vehicle
- standard sport utility vehicle
- small pickup truck
- standard pickup truck
- minivan
- van
- vans—$80,000
- sport utility vehicles—$80,000
- pickup trucks—$80,000
- other—$55,000
The IRS says that all vehicles that were classified as an SUV, van, or pickup truck, for purposes of the new clean vehicle tax credit prior to the Feb. 3rd classification update, continue to be subject to the same $80,000 MSRP cap.
For those vehicles that are now classified as SUVs and are subject to the higher limit, taxpayers should get a seller’s report.
- name and taxpayer identification number of the seller
- name and taxpayer identification number of the taxpayer
- vehicle identification number of the new clean vehicle
- battery capacity of the new clean vehicle
- verification that the taxpayer is the original user of the new clean vehicle
- the date of the sale and the sales price of the vehicle
- maximum credit allowable for the new clean vehicle being sold
- for sales after Dec. 31, 2023, the amount of any transfer credit applied to purchase
- a declaration under penalties of perjury from the seller
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