The Internal Revenue Service (IRS) has updated their list of electric vehicles (EVs) eligible for the $7,500 tax credit and now all variants of the Model Y qualify for the full credit. The inclusion of all variants is because the IRS now considers all trim levels of the Model Y as an SUV.
Last month the IRS announced which vehicles would be eligible for the new tax credit under two categories of passengers cars and SUVs. Each came with their own MSRP price limit, with passenger cars up to $55,000 qualifying and SUVs up to $80,000 also qualifying. Strangely the IRS only classified the seven-seat Model Y as an SUV, leaving the far more popular five-seat configuration out in the cold and ineligible for the credit. As it turned out it was because the IRS looked at the vehicle’s weight to consider it an SUV or not, and the five-seat Model Y came just under that threshold by a few hundred pounds.
Tesla took matters into their own hands a few weeks later and slashed the price of the Model Y, making more variants eligible, but still leaving some without access to the credit. Today the IRS has updated their eligibility requirements and now all variants of the Model Y are classified as an SUV with the $80,000 MSRP limit, meaning all now have access to the full $7,500 tax credit.
| 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 |
Tesla wasn’t the only automaker left scratching their heads at the IRS’ requirements. The Ford Mustang Mach-E, Cadillac Lyriq, and several trims of the VW ID.4 were also stuck with the $55,000 limit, but today those EVs have also been classified as SUVs and are also eligible for the full tax credit.
These credits are only valid until March at which time the IRS is expected to release new guidelines around battery sourcing requirements which will alter which EVs are eligible for the credit.
You can see the full list of eligible vehicles and their price limits here.
