When is an SUV not an SUV? It will depend on who you are asking — and it is a query customers within the newly expanded clear car tax credit score ought to have a look at rigorously, since it is the IRS that decides whether or not or not the vehicles they simply purchased will qualify. The reply will not be so simple as it appears.
The Inflation Reduction Act, the tax, local weather and well being care legislation enacted final 12 months, features a key tax credit score for brand spanking new (as much as $7,500) and used (as much as $4,000) clear car purchases. To meet the necessities for the tax credit score, autos in service after Dec. 31, 2022 should meet MSRP limits primarily based on physique kind and weight and should bear closing meeting in North America. The Treasury Department is ready to launch extra pointers on battery supply necessities in March, however for now, it is the car classification requirement that is making some automotive firms uneasy.
Cadillac web site
The potential confusion for customers begins with how autos are categorized. For instance, Cadillac’s new Lyriq EV qualifies for the clear car tax credit score beneath IRS pointers — however solely as a automotive, not as an SUV. Cadillac markets the Lyriq as an SUV, however beneath its present classification as a automotive, and with an MSRP simply over $62,000, the car is lower out of the important thing tax credit score. That’s as a result of vehicles and different autos with an MSRP of as much as $55,000 qualify for the credit score. The Lyriq can be eligible for a tax credit score at its sticker value provided that it have been categorized as a clean-energy SUV, pickup truck or van, which tops out at an MSRP of $80,000.
A Treasury official informed CBS News that the company didn’t create new car classification pointers however as an alternative used present Corporate Average Fuel Economy (CAFE) requirements to find out car varieties and their eligibility for the tax credit score. The official confused that automotive makers are already conscious of how autos are categorized beneath authorities pointers.
That clarification might confuse potential electrical automotive customers, however a Treasury official confused authorities rules provide “clear criteria” for outlining variations between SUVs and vehicles. According to Kelly Blue Book, some autos might not have the appropriate measurements, angles, drivetrain (ex; all-wheel-drive), or minimal weight to satisfy the federal government pointers to qualify as an SUV for the tax credit score. The Lyriq does not meet the burden requirement, which is 6,000 kilos, nor does it have all-wheel-drive.
And some automakers are complaining that completely different departments within the federal authorities aren’t itemizing autos in a constant method. For occasion, GM, the mum or dad firm of Cadillac, is pushing again on the Lyriq’s classification and has requested the Treasury Department to rethink its stance.
“[The] Cadillac Lyriq is a U.S., union-built electric vehicle that is currently ineligible for the tax credit, a GM spokesperson told CBS News in a statement. “The tax credit score for electrical SUVs has a MSRP cap at [$80,000]. However, whereas the Cadillac Lyriq is listed as an SUV by the Environmental Protection Agency and Department of Energy on fueleconomy.gov, the Department of Treasury, which administers the tax credit score, presently classifies Lyriq in addition to numerous autos manufactured by different automotive makers as passenger vehicles,” the statement said.
GM isn’t the only company upset about the tax credit classification. Tesla CEO Elon Musk has also expressed his discontent in a tweet last week.
Tesla’s five-seat model of the Model Y didn’t qualify for the SUV MSRP cap as a result of it is categorized as a passenger automotive on the IRS web site. But the seven-seat Model Y does meet the $80,000 MSRP qualification. However, the baseline value for the Model Y is now simply over $52,000 after Tesla lower costs of a few of its autos this month, which might convey it beneath the $55,000 restrict for passenger vehicles. An IRS truth sheet notes that car descriptions on window value stickers or these on fueleconomy.gov might not line up with the car classification for the tax credit score.
Ford.com
Other carmakers, like Volkswagen and Ford, even have autos marketed as SUVs that qualify for the tax credit score, however the IRS classifies them as vehicles. Unlike the Lyriq, nonetheless, the Ford Escape plug-in hybrid and Volkswagen ID.4, each have beginning costs under the $55,000 MSRP restrict for passenger vehicles, so they’ll qualify for the tax credit score anyway.
VW.com
But even when the car is eligible, the automotive purchaser will not be. The IRS has set earnings necessities for each new and used EV car purchases, permitting {couples} with an annual joint earnings of $300,000 to assert the credit score, in addition to people making as much as $150,000 and heads of households with a most earnings of $225,000.
There are decrease earnings necessities for used autos: a $150,000 most adjusted gross earnings for married {couples}, $112,500 for heads of households and $75,000 for all others.
An IRS internet web page notes that extra certified clear autos will proceed to be added on an ongoing foundation.