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Tesla’s five-seat Model Y and other EVs now qualify for the new $7,500 federal tax credit


Don’t worry if the lack of a federal tax credit put you off from buying certain Tesla Model Y variants or other EVs — they might now qualify. The Treasury Department has revised its classification standard to treat more vehicles as SUVs rather than sedans, raising the price threshold from $55,000 to $80,000 and making more EVs eligible for the Internal Revenue Service’s (IRS) full $7,500 credit under the Inflation Reduction Act. As Autoblog explains, that should cover five-seat versions of the Model Y (only seven-seaters qualified before) as well as the Cadillac Lyriq, Ford Mustang Mach-E, Ford Escape Plug-in Hybrid and VW ID.4.

The Treasury expanded the classification by using the Environmental Protection Agency’s public-oriented Fuel Economy Labeling standard rather than the Corporate Average Fuel Economy (CAFE). This will help treat crossovers “consistently,” the department says. This also helps the credit classifications line up with what you see both on the car label and the US government’s FuelEconomy.gov website.

You can claim the full amount for any qualifying EV bought and put into service in 2023, including those that weren’t eligible under the CAFE standard. Any vehicle that could receive the credit before will still pass muster, the Treasury says.

The change of heart comes after the IRS invited public comments on a proposed change. Tesla chief Elon Musk encouraged input from his Twitter followers soon afterward. It’s unclear how much of a role Tesla’s fanbase played, but the decision isn’t surprising. Under the old criteria, some of the best-known EVs didn’t qualify. The credits were meant to spur EV adoption and further the Biden administration’s climate goals — that was going to be harder if customers couldn’t get deals on the most popular models.

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