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Tesla Model 3 RWD and Model Y - and other EVs - will qualify for full $7,500 if you take delivery between 01/01/2023 and 02/28/2023
December 20, 2022 at
08:58 AM
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Last Edited by TofuVic December 29, 2022 at 01:20 PM
12/29/2022 UPDATE: This thread is no longer accurate; it was accurate when I initially posted it on 12/20/2022, but IRS published its list [irs.gov], and some vehicles will not qualify; of note: Model Y 5-Seat does not qualify because it passes the $55,000 limit, whereas the Model Y 7-Seat does qualify because it is below the $80,000 limit.
Hello, I hope you're well.
For people interested in Tesla electric vehicles, there has been a lot of confusion and uncertainty around whether they will qualify for the full $7,500 tax credit from the Inflation Reduction Act (IRA). Because of a new announcement from the US Treasury that was released on 12/19/2022, the Tesla Model 3 RWD, Model Y Long Range, and Model Y Performance will qualify for the full $7,500 tax credit between 01/01/2023 and 02/28/2023 because the battery sourcing requirements aren't enforced until March 2023.
Background information in chronological order:
Tofu Vic
Hello, I hope you're well.
For people interested in Tesla electric vehicles, there has been a lot of confusion and uncertainty around whether they will qualify for the full $7,500 tax credit from the Inflation Reduction Act (IRA). Because of a new announcement from the US Treasury that was released on 12/19/2022, the Tesla Model 3 RWD, Model Y Long Range, and Model Y Performance will qualify for the full $7,500 tax credit between 01/01/2023 and 02/28/2023 because the battery sourcing requirements aren't enforced until March 2023.
Background information in chronological order:
- January 2020: Tesla's eligibility for the previous tax credits ended when it hit the 200,000 sales cap limit on vehicles sold per automaker.
- 08/16/2022: President Biden signed the Inflation Reduction Act (IRA), which removes the limit, making Tesla eligible again starting 01/01/2023. However, as part of the eligibility, there are new rules for cars assembled in North America that are planned to start on 01/01/2023; of note: $3,750 if the battery components are built in North America, and another $3,750 if critical minerals in the battery are sourced from the US or free trade countries. Tesla vehicles definitely met the first tax credit, but the second one was unknown.
- 12/19/2022: The US Treasury announced that there is a delay, so instead of the eligibility rules starting on 01/01/2023, they'll be proposed in March 2023, with them stating (emphasis mine), "Treasury will issue a notice of proposed rulemaking (NPRM) in March with proposed guidance on the critical minerals and battery components requirements. By statute, the critical mineral and battery component requirements take effect only after Treasury issues that proposed rule." (source [treasury.gov])
- 12/29/2022: IRS published the list of vehicles that would get the tax credits starting 01/01/2023 [irs.gov]. Some vehicles will not qualify; of note: Model Y 5-Seat does not qualify because it passes the $55,000 limit, whereas the Model Y 7-Seat does qualify because it is below the $80,000 limit.
- Single tax filers are eligible if their income is below $150,000; heads of households if income is below $225,000; and joint filers' if income is below $300,000.
- New electric sedans cannot cost more than $55,000 and SUVs can't cost more than $80,000. (The Model 3 RWD, Model Y Long Range, and Model Y Performance are eligible as long as you don't make changes that go above the limit.)
- Tax credits will be received when you file your taxes in 2024.
- Check line 24 of your tax form to see your "total tax," if it is over $7,500, you'll be able to receive the full tax credit.
- The limits are based on the car's price, so you don't have to worry about taxes and fees.
- Do note that if you make modifications that push the car past the cost limit, you may become ineligible. If you plan to get Enhanced Autopilot or Full-Self Driving (FSD) and that may push the price past $80,000, it is a better idea to not add those modifications until you take delivery, at which point you can add it to the car as a software upgrade.
- In addition to the current $3,750 instant discount and 10,000 Supercharger miles offered by Tesla, there is the chance of additional incentives if you take delivery in December 2022.
- As part of IRA, the Alternative Fuel Refueling Credit that ended in 12/31/2021 may be returning, where you may be able to get a tax credit for a wall charging station; it states "for residential property, the credit amount is continued at 30% of the cost with a maximum amount of $1,000" (sources: Congress website [congress.gov] and TurboTax website [intuit.com]).
- Technology will always improve. If you're the type of person who has buyer's remorse, keep this in mind. Of note, radar - of the high definition (HD) type - may be returning to Tesla cars as early as January or February of 2023 (source [electrek.co]).
- Starting 2024, per the IRA, the $3,750 or $7,500 discount will be point-of-sale discounts. This means that you would not have to wait until you file taxes in the following year in order to get the money; furthermore, the sales tax will be lower because the car's price is discounted. Do note, however, that this still depends on your tax liability.
Tofu Vic
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That said, I am concerned that Tesla may not meet the fully $7,500 by 2024, when the requirements may be stricter.
Of course, if you're able to wait, the technology and everything else will improve as time goes on, so it often makes sense to wait if you're able to do so.
Thanks for your input,
Tofu Vic
Take care,
Tofu Vic