The United States Treasury Department announced on Friday that it is revising its definition of an “SUV” to allow more electric vehicles from Tesla, General Motors, and other automakers to qualify for up to $7,500 in federal tax credits at higher costs.
Tesla CEO Elon Musk publicly criticized the previous criteria on Twitter, while manufacturers like GM and Ford Motor lobbied to revise the parameters ahead of final rules being announced next month.
Expanded EV Tax Credits
With new rules for electric vehicle tax credits in place, that response could save some car buyers hundreds of dollars while increasing carmaker profits significantly. Tax incentives for vehicles costing more than $55,000 are no longer available under the new rules.
However, the starting price for an SUV might be as high as $80,000. Until today, the Treasury Department considered the Mustang Mach-E a vehicle rather than an SUV for tax credit purposes. The Tesla Model Y is the same unless it has a third row of seats.
The tax laws seemed to contradict both plain sense and what the EPA said. So, on Friday, the US Treasury Department stated that it was modifying its definition of an SUV to conform to the “consumer-facing” criterion used by the EPA on fuel-economy stickers and on its website.
Previously, the Treasury Department relied on National Highway Traffic Administration vehicle definitions to manage Corporate Average Fuel Economy standards. The so-called CAFE definitions of automobiles are frequently different from what the average American might believe based on the shape of a vehicle.
Furthermore, under the CAFE standards, the same vehicle may be classified as an SUV when equipped with specific extras but as a car when not.
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Which Vehicles Qualify?
When equipped with all-wheel drive, the Volkswagen ID.4 is classified as an SUV under CAFE, however, it is classified as a car otherwise. According to the EPA’s website rules, those vehicles are SUVs regardless of how they are equipped.
“This change will allow crossover vehicles that share similar features to be treated consistently,” the Treasury Department said in an announcement.
However, not every car marketed as an SUV will necessarily qualify. The Chevrolet Bolt EUV, for example, remains under the $55,000 price restriction, despite the fact that GM refers to it as a crossover SUV version of the Bolt hatchback. According to Chris Harto, a senior policy researcher for Consumer Reports, the lines separating cars and SUVs are frequently hazy.
Individuals who purchased an automobile since January 1, 2023 and who did not qualify for a tax credit under the previous standards may now apply, according to Treasury’s notice. According to Treasury, no vehicles will lose eligibility as a result of this rule change.
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