Tesla Model Y SUV eligible for more EV tax credit

More EV tax credits are available due to the IRS updating its criteria for what qualifies as an SUV.

The IRS will use the EPA's guidelines for cars qualifying as an SUV or crossover, meaning all models of the Tesla Model Y qualify for the higher $80,000 price cap for the EV tax credit. The tax credits, funded by the IRA Inflation Reduction Act, previously used IRS guidance that classified only the 7 passenger variants of the Model Y as an SUV.

Treasury is updating the vehicle classification standard to use the consumer-facing EPA Fuel Economy Labeling standard, rather than the EPA CAFE standard to make it easier for consumers to know which vehicles qualify under the applicable MSRP cap. The change will allow crossover vehicles that share similar features to be treated consistently, Treasury said in a statement.

The new guidance also allows all versions of the Ford Mustang Mach-E EV, Volkswagen ID. 4 EV, and the Cadillac LYRIQ EV, are used to use the higher $80,000 SUV price cap.

John Bozzella, president and CEO of the Alliance for Automotive Innovation, said in a statement that the reclassification was a good decision that clears up some EV tax credit confusion and instantly helps customers shopping for an electric crossover or SUV. Ford shares were paired earlier in the news, though they are not as strong as expected Q 4 earnings results are weighing on the stock. Shares of GM are trading higher on the news.