The IRS announced through Notice 2023-16 that it would change the vehicle classification definition used to determine whether a vehicle is a pickup truck, SUV, van, or other vehicles of the recently modified and expanded Sec. 30D clean vehicle tax credit.
The Department of Treasury said the change was made to make it easier for consumers to determine which vehicles qualify. It allows crossover vehicles that share similar features with other vehicles to be treated consistently.
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The revised vehicle classification definition allows several vehicles to qualify for the New Clean Vehicle Tax Credit, including some crossover vehicles. (Photo: Shacknews)
Previously, the IRS used the existing Corporate Average Fuel Economy (CAFÉ) standards to determine the classification of the vehicle with an MSRP limitation of $55,000 or $88,000. According to The Tax Adviser, proposed regulations will use the consumer-facing EPA Fuel Economy Labeling Standard in 40 CFR Section 600.315-08 as a basis for vehicle classification.
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The change in vehicle classifications also aligns under the clean vehicle credit with the classification shown on the vehicle label and FuelEconomy.gov.
The change implies that several vehicles are now eligible for the tax credit. For instance, vehicles originally classified as sedans and with a lower MSRP of $55,000 are eligible for up to a $7,500 tax credit. The IRS website has also updated its list of newly qualified vehicles with an $80,000 MSRP limitation. Several car models have qualified for the tax credit, including General Motors’ Cadillac Lyriq, Tesla’s Model Y, and the Ford Mustang Mach-E.
The IRS said customers who have purchased and used the qualified vehicles since January 1, 2023, can claim the credit.
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