Treasury updates vehicle classification standard for $7,500 EV tax credit
As part of the Inflation Reduction Act, the rules for the $7,500 tax credit to encourage Americans to buy electric vehicles were modified. The new rules took effect 1 January 2023 and expanded the number of cars that would qualify for the clean vehicle tax credit.
However, there were interdepartmental discrepancies as to which cars qualified due to their classification based on the manufacturer’s suggested retail price (MSRP) limits. Some crossover vehicles were considered in some cases as a car, subject to the $55,000 limit, but in other cases an SUV, subject to the $80,000 limit.
The Treasury Department has announced that it has updated the vehicle classification standard to make it easier for consumers to know which vehicles qualify under the applicable MSRP cap. The consumer-facing EPA Fuel Economy Labeling standard will be used instead of the EPA CAFE standard.
Consumers who have purchased and placed in service vehicles since the beginning of the year that meet the new standards put in place and meet the other requirements can claim the credit.
Further guidance regarding critical minerals and battery components will be issued in March.