IRS Realizes What an SUV Is, Adds Tax Credit Eligibility for More Large Vehicles

The Cadillac Lyriq, VW ID.4, Ford Mustang Mach-E, and more now have higher tax credit price ceilings.

byPeter Holderith|
IRS Realizes What an SUV Is, Adds Tax Credit Eligibility for More Large Vehicles

The revised EV tax credit is so complicated that the IRS didn't really know what it was doing when it started classifying vehicles as SUVs or sedans/wagons. It said the Cadillac Lyriq was actually a wagon, the Ford Mustang Mach-E definitely wasn't an SUV, and the rear-wheel-drive Volkswagen ID.4 was a car in RWD form, but an SUV in all-wheel-drive form. Some of these vehicles didn't get the credit eligibility as a result, but that's now changed. I'm happy to report that, for once, a government bureaucrat has learned something. I can feel the sun shining a little brighter.

After at least one of the aforementioned automakers complained, the IRS has now said that the Lyriq, Mach-E, every electric SUV from Volkswagen, and every Tesla Model Y are indeed SUVs. That means their price cap for receiving the full EV credit is $80,000 instead of $55,000.

Ford already cut Mach-E prices to make the lower trims qualify for the $55,000 EV tax credit. Tesla also had some serious price cuts, although all of its models were affected, not just SUVs. The justification for the electric automaker's discounts is probably more diverse. The Lyriq is expected to get a base trim below its current price of $60,000, however, it is set to be above $55,000. It's been widely reported that VW likewise has no plans to cut the prices of its EVs.

This is some of the first good news to ever come out of the IRS. More people will now be able to afford electric vehicles. There are still hurdles for other automakers, though. The EV tax credit currently specifies that battery materials must be sourced in the United States or a country friendly with it. Basically anywhere that's not China or Russia. Some companies like Hyundai are still struggling with this, and their vehicles cannot receive the full tax credit as a result.

Got a tip? Send us a note: