The Internal Revenue Service has released a preliminary list of electric vehicles that qualify for the US federal government’s clean vehicle tax incentives. However, readers immediately noticed inconsistencies and oddities that may put some automakers, like Tesla, at a disadvantage.
The automaker’s CEO, Elon Musk, wrote on Twitter that the rules were “messy” after user @farzyness tweeted that the plug-in hybrid Jeep Wrangler 4xe qualifies for incentives, while the all-electric Model Y does not.
The difference comes down to how much the vehicles cost and how they are classified. According to IRS.gov, “pickup trucks, sport utility vehicles and pickup trucks” must have a base MSRP of less than $80,000 to qualify for the incentives, while “other vehicles” must have a base price of less than $55,000.
What the site doesn’t clarify, however, is how the IRS classifies each individual vehicle. On the site, the Jeep Wrangler 4xe is considered an SUV, while the Model Y is considered “other.” More specifically, according to the IRS, the two-row, five-passenger Model Y is classified as a passenger car, while the three-row Model Y is considered an SUV, meaning the former has a lower MSRP limit of $55,000. and the second, a higher one at $80,000.
Read: Tesla delivered a record 405,000 vehicles in the fourth quarter and 1.3 million in 2022
Similar apparent inconsistencies can be found in the IRS vehicle list. While Volkswagen’s RWD ID.4 is considered “other,” the AWD version meets the requirements to be an off-road vehicle, or SUV. And, while all Ford Mustang Mach-E and Cadillac Lyriq are considered the same type of vehicle, according to the IRS, they are not SUVs and therefore must cost less than $55,000 to qualify for the incentives, something Ford does, but Cadillac no, since it starts from $62,990.
Why is that? While many have postulated that gross vehicle weight could have something to do with these ratings, this is often not the case. People familiar with the IRS reasoning told Carscoops that the service decided to use pre-existing definitions of vehicles found in the Corporate Average Fuel Economy (CAFE) rules.
“[The] Treasury consulted with other federal agencies and did not create a new definition of vehicle classification. The pre-existing definition in Treasury’s Notice of Intent refers to a long-standing regulation with objective standards under CAFE. Manufacturers already report this information to the EPA, and the definition offers clear criteria for delineating between cars and SUVs. This reduces potential gaming opportunities from the MSRP caps,” our source said.
More: Here’s why some vehicles qualify as SUVs and others don’t for IRA EV tax credits
However, thanks to CAFE’s complicated regulatory equations, just because a vehicle is listed as an SUV on, say, fueleconomy.gov, it doesn’t necessarily consider it an SUV by the IRS. Unsurprisingly, the rules are creating confusion, even among the automakers we contacted for this story, and not all agree with the IRS’s reasoning, as Cadillac spokesman Joe Singer told us.
“In determining how vehicles should be classified, Treasury should take advantage of existing US government definitions and practices, using criteria and processes similar to those used by the Environmental Protection Agency (EPA) and the Department of Energy (DOE). ),” Singer wrote. “We are addressing these concerns with Treasury and hope that the upcoming guidance on vehicle classifications provides the necessary clarity for consumers and dealers, as well as regulators and manufacturers.”
However, the rules were not thrown out of thin air, as it may seem to anyone without a Ph.D. in tax law. If you want to dig into the details of why an extra row of seats magically turns a Model Y into an SUV, you can read a more in-depth article on that by Carscoops editor-in-chief John Halas.
However, for our purposes, suffice it to say that there are consistent reasons for the way vehicles are classified, they are just buried too deep in government regulations. If you want to find out which vehicles qualify for the new government tax incentives, you can check the list below. If a vehicle’s base price is less than the MSRP limit, then it qualifies.
| QUALIFYING MODELS | ||
|---|---|---|
| model year | Vehicle | MSRP limit |
| 2023 | Audi Q5 TFSI and Quattro (PHEV) | $80,000 |
| 2021, 2022, 2023 | bmw 330e | $55,000 |
| 2021, 2022, 2023 | BMW X5 xDrive45e | $80,000 |
| 2022, 2023 | Cadillac Lyric | $55,000 |
| 2022, 2023 | chevrolet bolt | $55,000 |
| 2022, 2023 | Chevrolet Bolt EUV | $55,000 |
| 2022, 2023 | Chrysler Pacifica PHEV | $80,000 |
| 2022, 2023 | Ford E-Transit | $80,000 |
| 2022, 2023 | Ford Escape plug-in hybrid | $80,000 |
| 2022, 2023 | Ford F-150 Lightning | $80,000 |
| 2022, 2023 | Ford Mustang Mach-E | $55,000 |
| 2022, 2023 | Jeep Grand Cherokee 4xe | $80,000 |
| 2022, 2023 | Jeep Wrangler 4xe | $80,000 |
| 2022, 2023 | Grand Tourer Lincoln Aviator | $80,000 |
| 2022, 2023 | lincoln corsair gran turismo | $55,000 |
| 2021, 2022, 2023 | nissan leaf S | $55,000 |
| 2021, 2022 | Nissan Leaf S Plus | $55,000 |
| 2021, 2022 | Nissan Leaf SL Plus | $55,000 |
| 2021, 2022 | Nissan Leaf SV | $55,000 |
| 2021, 2022, 2023 | Nissan Leaf SV Plus | $55,000 |
| 2022, 2023 | Rivian R1S | $80,000 |
| 2022, 2023 | Rivian R1T | $80,000 |
| 2022, 2023 | Tesla model 3 long range | $55,000 |
| 2022, 2023 | Tesla model 3 rear wheel drive | $55,000 |
| 2022, 2023 | Tesla Model Y AWD: 5 seats (2 rows) | $55,000 |
| 2022, 2023 | Tesla Model Y AWD: 7 seats (3 rows) | $80,000 |
| 2022, 2023 | Tesla Model Y long range: 5 seats (2 rows) | $55,000 |
| 2022, 2023 | Tesla Model Y long range: 7 seats (3 rows) | $80,000 |
| 2022, 2023 | Tesla Model Y Performance: 5 seats (2 rows) | $55,000 |
| 2022, 2023 | Tesla Model Y Performance: 7 seats (3 rows) | $80,000 |
| 2023 | VW ID.4 | $55,000 |
| 2023 | Volkswagen ID.4 AWD Pro | $80,000 |
| 2023 | Volkswagen ID.4 AWD Pro S | $80,000 |
| 2023 | Volkswagen ID.4 Pro | $55,000 |
| 2023 | Volkswagen ID.4 Pro S | $55,000 |
| 2023 | Volkswagen ID.4S | $55,000 |
| 2022 | Volvo S60 (PHEV) | $55,000 |
| 2022 | Volvo S60 Extended Range | $55,000 |
| 2023 | Volvo S60 T8 Recharge (Extended Range) | $55,000 |