Tesla Model 3 and Model Y Now Qualify for Full $7,500 U.S. Federal Tax Credit
Tesla Model 3 and Model Y vehicles now qualify for the full $7,500 federal tax credit for clean cars, according to an official announcement by the U.S. EPA on Tuesday. This update means that all variants of the Model 3 and Model Y are now eligible for the tax credit, whereas previously only certain versions qualified for the full subsidy, while others received a partial credit. Tesla had already indicated this change on its website last Friday, prior to the EPA’s official update.
The expanded eligibility for the tax credit includes the Model 3 Long Range AWD and Standard Range Rear-Wheel Drive variants, both of which now qualify for the $7,500 credit instead of the previous $3,750 partial rate. As a result, the entry-level Model 3 RWD’s price is reduced from $40,240 (excluding a $1,390 destination fee) to $32,740, making it comparable in price to budget-friendly gas-powered midsize cars like the Toyota Camry. Additionally, certain states, including California, offer additional tax credits for Tesla vehicles, further reducing their price.
It’s worth noting that the larger and more expensive Tesla vehicles, such as the Model S and Model X, do not qualify for the federal tax credits under the new program. The Inflation Reduction Act, which introduced the updated tax credit program, sets the price cap at $55,000 for sedans and $80,000 for SUVs. Tesla’s pricing is subject to frequent changes, so it’s essential to consider the total cost, including add-ons, delivery fees, and other charges, to ensure it remains within the eligibility criteria.
Furthermore, the revamped federal program imposes certain restrictions, including an income cap of $150,000 for individuals, which limits high-earners’ eligibility for the tax credit. It’s important to note that the list of eligible vehicles is likely to change again in 2024, as the requirements for critical mineral sourcing and battery component manufacturing in North America become more stringent.
See our guide covering which EVs are eligible for the $7,500 tax credit. We also have a guide covering the guidelines for the tax credit, and what you need to do in order to claim it.
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