IRS definitions of what's a car vs SUV by manufacturer for $55k vs $80k price limit

[macheboston]

The IRS has posted a page listing cars that qualify based on final assembly and what the MSRP price cap is for each car based on if it's a car or SUV.

5 seat Model Y is a car and subject to $55k limit.

7 seat Model Y is an SUV and is subject to a $80k limit.

Ford Mustang Mach E is a car ($55k limit).

VW ID4 is a car ($55k limit) unless it's AWD, then it's an SUV ($80k limit).

This makes absolutely no sense. I would have thought they'd follow EPA's guidance (fueleconomy.gov)

Here's the IRS page:

Credits for new clean vehicles purchased in 2023 or after | Internal Revenue Service

You may qualify for a clean vehicle tax credit up to $7,500 if you buy a new, qualified plug-in electric vehicle or fuel cell electric vehicle.

www.irs.gov

 

[WyoDude]

Will be interesting to see how tesla responds to this after the 1st

 

[tangers]

This matches my initial guess. based on the number of seats. I am guessing Tesla will make 5 seats Y starting from $55000 and 7 seats option for additional $5000 or more instead of $3000

 

[dwest218]

This matches my initial guess. based on the number of seats. I am guessing Tesla will make 5 seats Y starting from $55000 and 7 seats option for additional $5000 or more instead of $3000

55k Tesla would have to be the base model. Throw just one option and you’re over. More likely, Tesla starts selling a whole bunch of 7 seaters at Fremont and now Austin. MYP is out of the picture.

 

[kishkaru]

Is the price cap it based on the MSRP of the base car, or the price of the exact car you're buying (with potential options)? The IRS language is not very clear on this. Does it also include the destination fee (which is required to be paid?)

I'm looking at my old Motor Vehicle Order Agreement for my existing vehicle, and it doesn't say "MSRP" anywhere like normally on a Monroney sticker. It lists out a price for "Model Y", and a list of add-ons (like paint, wheels, FSD etc). Then a Subtotal, Destination Fee, and Total.

 

[MP3Mike]

Is the price cap it based on the MSRP of the base car, or the price of the exact car you're buying (with potential options)? The IRS language is not very clear on this. Does it also include the destination fee (which is required to be paid?)

It is very clear that it is the MSRP of the exact car as delivered to the dealer, not including destination charges: Topic B — Frequently Asked Questions About Income and Price Limitations for the New Clean Vehicle Credit | Internal Revenue Service

Q3. How will I know what the manufacturer's suggested retail price (MSRP) is for a vehicle? (added December 29, 2022)​

A3. The MSRP will be on the vehicle information label attached to each vehicle on a dealer's premises. The MSRP for this purpose is the base retail price suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges or optional items added by the dealer, or taxes and fees.

 

[kishkaru]

plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer.

So does that mean upfront payment for FSD is excluded from the MSRP calculation? Since it's software and not "physically attached" to the vehicle.

 

[Seminole]

So does that mean upfront payment for FSD is excluded from the MSRP calculation? Since it's software and not "physically attached" to the vehicle.

No. It’s based on the window sticker. If you option your car with FSD it’s listed on the window sticker.

 

[randmness]

I wonder if they’ll lower the price of FSD, or potentially option out the equipment entirely. I can’t imagine the take rate has been particularly high the last quarter. $15K FSD option on a $55K car sounds wild.

 

[hmmwv]

If Tesla decides to keep the MYLR5 under the bracket then they'll have to make the MYAWD5 (SR) something like $50k to 52k, not sure if they're willing to do that. Maybe Tesla will only lower MYAWD5 to $55k, and lower MYLR5 to $57k to compensate its disqualification. The 7 seater option is a tricky one, I can see them increase the option cost significantly, but still worthwhile for customer to pick.

 

[kishkaru]

The MSRP for this purpose is the base retail price suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery

I guess it depends on what the IRS considers the "base retail price".

So for a theoretical base $55k Model Y, would $55k be "base retail price"? Or the final cost with any customer spec'd add-ons such as color, wheels that would contribute to the base MSRP? But FSD is not a physical equipment?

Here is my monroney sticker. It doesn't say FSD anywhere on it, although my car has it (I ordered it with FSD from the start)

So what's the "base retail price" or MSRP in my case?
I would argue that the base is $41k + $8990 for the total of $49,990.
Then $4k of "optional equipment" for a total MSRP of $54k

 

[MP3Mike]

I guess it depends on what the IRS considers the "base retail price".

So for a theoretical base $55k Model Y, would $55k be "base retail price"? Or the final cost with any customer spec'd add-ons such as color, wheels that would contribute to the MSRP?

The tax credit is based on the MSRP, including options, but not including the destination charge.

 

[hmmwv]

I would argue that the base is $41k + $8990 for the total of $49,990.
Then $4k of "optional equipment" for a total MSRP of $54k

Yes that'd be my interpretation, the IRS will consider the $54k the MSRP of the vehicle, excluding destination / doc fee and what you paid for FSD.

 

[Seminole]

I guess it depends on what the IRS considers the "base retail price".

So for a theoretical base $55k Model Y, would $55k be "base retail price"? Or the final cost with any customer spec'd add-ons such as color, wheels that would contribute to the MSRP? But FSD is not a physical equipment?

Here is my monroney sticker. It doesn't say FSD anywhere on it, although my car has it (I ordered it with FSD from the start)

View attachment 890250

So what's the "base retail price" or MSRP in my case?
I would argue that the base is $41k + $8990 for the total of $49,990.
Then $4k of "optional equipment" for a total MSRP of $54k

Here’s one with it included.

Tesla is gonna have to price the 5 seater much less than $55k otherwise the only way to get the discount will be a bare bones no option Model Y. Adding paint, white interior, 20in wheels, or the hitch would all individually disqualify a $55k car and even if they priced it at $52 you basically get to pick one option you want.

 

[kishkaru]

Yes that'd be my interpretation, the IRS will consider the $54k the MSRP of the vehicle, excluding destination / doc fee and what you paid for FSD.

I think we're on the same page then. Pre-paid FSD is not included in MSRP for IRS calculation. It's not part of the "base retail price", and also not a physical option/accessory. It's not listed on my Monroney sticker.

 

[acpd]

I have been waiting for this guidance and as expected MY is not included. They did allow 7 seater, which is nice for those who needs 7 seats.

So almost certainly Tesla will have to sell ~$50ish to $55k version of MYSR. Otherwise no way in hell people who qualify for Tax credit will buy MY 5 seater.

That means MY could cost ~$43k - $48k after tax credit. Even if it has lower range. That would be a good buy.

Let's see how Tesla will respond.

 

[yobigd20]

No. It’s based on the window sticker. If you option your car with FSD it’s listed on the window sticker.

I think all MY have the $15k on the sticker. Mine does and it didnt come with it nor did i pay for it.

 

[ankit]

I have been waiting for this guidance and as expected MY is not included. They did allow 7 seater, which is nice for those who needs 7 seats.

So almost certainly Tesla will have to sell ~$50ish to $55k version of MYSR. Otherwise no way in hell people who qualify for Tax credit will buy MY 5 seater.

That means MY could cost ~$43k - $48k after tax credit. Even if it has lower range. That would be a good buy.

Let's see how Tesla will respond.

I highly doubt they will do that. Instead they might just discontinue the 5 seater, and only sell 7 seaters to get the tax credit.

 

[VT_EE]

This illogical list just proves that there is no real definition of a “SUV”. The fact that the 5-seat ID4 is an SUV, but the 5-seat Y is not, is utterly ridiculous. Add in the fact that the 7-seat Y is an SUV, but not the 5-seat version is insane.

 

[acpd]

I highly doubt they will do that. Instead they might just discontinue the 5 seater, and only sell 7 seaters to get the tax credit.

That would drop their numbers like rock. Tesla will been abusing customers with quarterly price increase. They raised MY LR price from $49k to $66k. Time to roll back some if those.

Don't forget, Tesla was selling $60k MYSR AWD, just few months ago, so this would only be $5k to $7k discount. Something they are doing for MYLR anyway this month. So very likely Tesla will have under $55k MY option.

Unless irs provides restrictions Tesla may lock range to say 200 and make you pay to unlock after u receive your tax credit.