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Eight Tesla Models Qualify for $7,500 U.S. Tax Credit

The Inflation Reduction Act (IRA) will enter into effect on January 1, 2023, offering a $7,500 tax credit to buyers of electric vehicles under certain conditions. Days before the deadline, the Internal Revenue Service (IRS) published the list of EVs that qualify for the IRA tax credit. Nevertheless, the list raised more controversies than it solved.
Eight Tesla models qualify for the $7,500 U.S. tax credit 6 photos
Photo: Tesla
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Biden Administration vowed to make the United States the main production hub for electric vehicles and Li-Ion batteries. The $430 billion IRA offers sizeable incentives to companies to produce electric cars and batteries in North America. It also provides tax credits for consumers who buy electric vehicles produced in North America with components sourced solely from U.S. free trade partners. Although the IRA was meant to combat China’s grip on battery raw materials, the act angered South Korea, Europe, and Japan, among others.

According to IRA, buyers get a $7,500 tax credit when they buy an eligible electric vehicle, provided it is built in North America and the battery materials, and components are not sourced from China or other countries on the U.S. block list. Since the U.S. Treasury has delayed the guidance regarding battery material provenance and component manufacturing, these restrictions do not apply yet. There are caps for cars’ prices and buyers’ income, but the key takeaway is that most people would get a $7,500 tax credit when they buy an eligible EV starting January 1, 2023.

Now, the IRS has also published the list of eligible EVs, which comprises 14 car manufacturers operating in the U.S. Not all have submitted a list of models but have agreed to become a “qualified manufacturer.” General Motors, Kia America, Mercedes-Benz USA, and Mazda Motor of America are among them. Being on this list doesn’t automatically mean that the EVs (or PHEVs) qualify for the tax credit. They still need to have undergone final assembly in North America and have an MSRP not exceeding $80,000 for vans, SUVs, and pickup trucks or $55,000 for other vehicles.

Tesla has submitted the list of eligible models, and we can see that only the Model 3 and Model Y vehicles qualify for the federal subsidy. It’s understandable why the Model S and Model X did not make it, considering that both have an MSRP well above the $80,000 limit. Only Tesla Model 3 RWD and the Long Range variants qualify, although the Model 3 Performance is not available to order for now.

It’s surprising that not all the variants of the Model Y are considered SUVs, thus benefitting from the higher MSRP limit. According to the IRS list, only the seven-seat variants of the Tesla Model Y are in the SUV category, while the five-seat variants are limited at $55,000. This applies to Tesla Model Y AWD, Model Y Long Range and Model Y Performance. Intriguingly, Tesla doesn’t sell a seven-seat variant of the Model Y Performance, although this might change in the future. Also, no five-seat Model Y has an MSRP under $55,000 as of now.

Even more intriguing, a similarly sized crossover, the Volkswagen ID.4, is considered an SUV when it comes with all-wheel drive, despite not having a third seat row. It also falls into the “other vehicles” category when it’s not fitted with an AWD drivetrain. It’s important to note that a tax credit doesn’t equal money in the bag. If you only owe $1,500 in taxes, you will only be able to apply for a $1,500 tax credit. You also need to observe the income caps: $150,000 for single filers, $300,000 for joint tax filers, or $225,000 for heads of households.
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About the author: Cristian Agatie
Cristian Agatie profile photo

After his childhood dream of becoming a "tractor operator" didn't pan out, Cristian turned to journalism, first in print and later moving to online media. His top interests are electric vehicles and new energy solutions.
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