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On Friday, the U.S. Treasury Department announced an update to how it implements the new clean vehicle tax credit. New rules introduced in the 2022 Inflation Reduction Act limit the number of EVs eligible for a federal tax credit of up to $7,500, along with income and price caps and requirements for final assembly in North America. I am writing further guidance, Domestic content and value requirements for EV batteries.
When the new rules were announced in January, there were complaints that five-passenger crossovers (Cadillac Lyric, Tesla Model Y, Volkswagen ID.4) counted as sedans with an MSRP cap of $55,000. . Those who purchased these EVs with a purchase price over $55,000 were not eligible for the tax credit, but the 7-seater Model Y was classified as his SUV, so only his MSRP limit of $80,000 was covered. Applied.
The reason is the Department of Treasury, which uses the U.S. Environmental Protection Agency’s Corporate Average Fuel Economy standard classification, which classifies light trucks (including SUVs and minivans) differently than passenger cars. But there is another EPA fuel economy labeling standard used in consumer applications, and the Lyriq, Model Y, and ID.4 already count as crossovers instead of sedans.
Well, to end the confusion, the Treasury Department says it will use consumer-facing standards. As a result, he has three models that were ineligible if the price had to be less than $55,000, but were eligible for the tax credit with a sales price of up to $80,000. (The EV tax credit guide has been updated to reflect that.)
“Congress’s intent on the IRA and clean vehicle tax credit is to rapidly accelerate the deployment of eligible EVs, and today’s decision is a big step toward that goal. It’s a rapidly growing segment, and in short, this announcement is great news for American drivers!” said Albert Gore, executive director of the Zero Emission Transportation Association, in a statement sent to Ars. in which he said:
In mid-January, Tesla slashed prices by up to $13,000 on select Model Y EVs eligible for the IRS tax credit.
But don’t get too comfortable. The Treasury Department plans to release rules on how it will implement domestic battery content requirements in March.
