The Treasury Department has cleared up confusion regarding the tax credit for electric vehicles (EVs) and the price cap for SUVs.
Electric vehicle on arid terrain with text overlay addressing confusion about EV tax credits updated.

Treasury Department Clears Up Confusion over SUV EV Credits

The U.S. Treasury Department has updated the classification of vehicles that qualify as a car or SUV under the new clean vehicle tax credit, aimed at making it easier for consumers to understand.

Clearing up Confusion

Great news for EV Car buyers who haven’t been able to get a clear answer on what would be considered an SUV and qualifying for the $80,000 price cap.

The previous definition, which relied on the Corporate Average Fuel Economy (CAFE) standard, was confusing and seemingly arbitrary, with some models eligible at higher MSRPs while others were not. As a result, car buyers have been fraught with confusion.

The IRS has updated its list of qualifying vehicles and their respective price caps, now set at $55,000 for cars and $80,000 for SUVs, pickups, and vans.  

To make it easier for consumers to know which vehicles qualify under the appropriate MSRP cap, Treasury is updating the vehicle classification standard to use the consumer-facing EPA Fuel Economy labeling standard rather than the CAFE (corporate average fuel economy) standard.

“This change will allow crossover vehicles that share similar features to be treated consistently,” stated the Treasury Department,” in a release. “It will also align vehicle classifications under the clean vehicle credit with the classification displayed on the vehicle label and the consumer-facing website FuelEconomy.gov.”

So how did this happen in the first place?

The Treasury Department used the definition between car and SUV with historical prerogative. Under that, SUVs with a gross vehicle weight under 6,000 pounds are tethered with trucks only if they have all-wheel drive (or four-wheel drive).

Retroactive Decision

The Treasury Department has also stated that consumers who placed a vehicle in service since January 1, 2023, that qualifies under the new definition and satisfies all the credit requirements will be able to claim the credit retroactively. 

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Click here to see if your vehicle qualifies, and take a look at the complete list of vehicles

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