Tesla Model Y, which is undoubtedly the most important EV this year, has gained full access to the $7,500 federal tax credit with a new $80,000 price limit.
With the new year, the US Treasury released the full list of electric vehicles eligible for the new $7,500 tax credit.
At the time, we noted that there were some inconsistencies on the eligibility for the SUVs. The type of vehicle is significant, since it determines a price limit to be eligible for the tax credit.
SUVs and pickup trucks have a higher MSRP limit of $80,000 instead of $55,000 for all other vehicles.
We noted that the Tesla Model Y only qualified with a seven-seat configuration and other SUVs, like the Ford Mustang Mach-E, also weren’t considered SUVs, according to the IRS list.
That’s despite the VW ID.4, which has about the same size as the Model Y and Mach-E, being considered an SUV and getting access to the tax credit for a price of up to $80,000.
It appears that the IRS defines an SUV only by the vehicle’s GVWR or Gross Vehicle Weight Rating, which appears to need to be over 6,000 lbs to be considered an SUV. There might also be some other criteria that the IRS hasn’t shared because, again, there are some inconsistencies in the list if it’s just based on weight.
Many EV enthusiasts are seeing this as a major mistake since it goes against the purpose of the program, which is to encourage sales of more efficient vehicles. Vehicles with lighter weights are more efficient. There are several SUVs that have less cargo space than the Tesla Model Y and Ford Mustang Mach-E that are considered SUVs in the program, like the BMW X5 plug-in and Jeep Wrangler plug-in.
It seems to be a major faux pas by the IRS, especially when it comes to the Model Y, which is going to be the most crucial electric vehicle this year as it is expected to have a global production capacity of over 1 million units.
Today, the IRS updated its list of eligible EVs and fixed its mistake by making all versions of the Model Y eligible up to $80,000 MSRP:
| Model Year | Vehicle Description | Applicable MSRP Limit |
|---|---|---|
| 2022, 2023 | Tesla Model 3 Rear Wheel Drive | $55,000 |
| 2022, 2023 | Tesla Model 3 Long Range | $55,000 |
| 2022, 2023 | Tesla Model 3 Performance | $55,000 |
| 2022, 2023 | Tesla Model Y All-Wheel Drive | $80,000 |
| 2022, 2023 | Tesla Model Y Long Range | $80,000 |
| 2022, 2023 | Tesla Model Y Performance | $80,000 |
Top comment by Ben P
Why is the federal government encouraging people to buy SUV's over sedans. This is pretty short sighted and has a lot of disadvantages. The GVWR arms race will accelerate, making the roads less safe for everyone who doesn't drive a tank.
This should significantly increase access to the Model Y for people who are eligible to the tax credit in the US, meaning single fillers with an income of $150,000 or lower and dual fillers with an income of $300,000 or lower.
The Ford Mustang Mach-E has also gained full eligibility up to $80,000:
| Model Year | Vehicle Description | Applicable MSRP Limit |
|---|---|---|
| 2022, 2023 | Ford Escape Plug-In Hybrid | $80,000 |
| 2022, 2023 | Ford E-Transit | $80,000 |
| 2022, 2023 | Ford F-150 Lightning | $80,000 |
| 2022, 2023 | Ford Mustang Mach-E | $80,000 |
| 2022, 2023 | Lincoln Aviator Grand Touring | $80,000 |
| 2022, 2023 | Lincoln Corsair Grand Touring | $80,000 |
Again, these eligibilities for the full $7,500 credits are good until March when we are expecting new guidelines about the battery requirements, which should affect eligibility.
But for now, it’s good news all around. The IRS is clearly trying to do the right thing.
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