Tesla’s most “sought-after” electric vehicle, Model 3, will see a 50% reduction from its current federal tax credit eligibility of $7,500 next year due to the US Government’s guidance update. The affected configurations include the Rear-Wheel Drive and Long Range configurations.
Official announcement
Tesla officially displayed the imminent changes in the Model 3 RWD and LR’s federal tax credit eligibility on its online configurator.
Tesla forewarned customers that the said configurations would lose half of the amount of its current tax credit privilege starting in 2024.
Notably, it occurred after the White House updated the guidance on the Inflation Reduction Act (IRA) electric vehicle tax incentives on December 1 to amplify stringent measures on foreign material sourcing.
That said, interested customers must accept delivery on or before December 31 to benefit from the full tax credit of $7,500 before it drops to $3,750 next year.
“All new Model 3 vehicles currently qualify for a federal tax credit for eligible buyers. $7,500 tax credit will reduce to $3,750 for Model 3 Rear-Wheel Drive and Model 3 Long Range on Jan 1, 2024. Take delivery by Dec 31 for full tax credit.”
Tesla
Qualifications
Tesla noted on its Electric Vehicle & Energy Incentives page that buyers must not use the electric vehicle for resale when they apply for the federal tax credit. In addition, they must primarily drive the vehicle in the United States.
Apart from these, Tesla also indicated the specific thresholds in the Adjusted Gross Income Limitations and MSRP price caps.
Adjusted Gross Income Limitations
| Adjusted Gross Income Limitations | Filers |
| $300,000 | Married couples filing jointly |
| $225,000 | Heads of households |
| $150,000 | All other filers |
Price caps for all eligible Tesla EVs
| Models | Price Caps |
| Model 3 | $55,000 |
| Model Y | $80,000 |
| Model X | $80,000 |
Interestingly, Tesla also indicated in the Model X dual-motor and all Model Y configurations the same notice, saying that customers must “take delivery by Dec 31 for full $7,500 tax credit.”
The federal tax credit reduction for Tesla EVs can potentially impede the company’s sales efforts in the following years. However, it will undoubtedly boost its delivery in 2023 as customers may want to take delivery by December 31 to take advantage of the full tax credit. Apart from this, Tesla is also currently offering a 6-month free Supercharging access for Model Y/3 customers who would also take delivery before the year ends.
