Which Tesla Models Qualify for a Tax Credit in April 2023?

onlyusedtesla
2023-04-24

Now that specific guidelines have been released by the IRS, it begs the question: which Tesla models still qualify for a tax credit in April 2023?

Introduction

This has been an ongoing series, updated based on Tesla’s pricing as well as IRS stipulations.

More detailed battery sourcing guidelines have been released, which has affected the eligibility of numerous electric vehicles across the industry.

Tesla is not immune to changes in the guidelines, even if the automaker is traditionally adept at navigating them and will likely circumvent them regardless.

All pricing is up-to-date as of April 24, 2023.

Tesla Model 3

Model 3 Rear-Wheel Drive

Current pricing: $39,990
Eligibility: Partially eligible — $3,750
Model 3 Rear-Wheel Drive is the only present-day Tesla configuration to utilize a lithium-iron phosphate battery, which is currently provided by a supplier in China.
While Tesla is planning to move production lines to North America for purposes of the tax credit as well as the benefit of future vehicles, Model 3 Rear-Wheel Drive qualifies for a partial clean vehicle tax credit of $3,750 today.

Model 3 Performance

Current pricing: $52,990
Eligibility: Fully eligible — $7,500
Model 3 Performance remains fully-eligible, as it utilizes a more conventional lithium-ion battery produced by suppliers predominantly in Japan with standing Free Trade agreements.

Model 3 Long Range All-Wheel Drive is unavailable for both custom orders, and existing inventory. Nonetheless, its previous battery and pricing of $49,990 would fully-qualify for a $7,500 tax credit.

Tesla Model Y

Model Y All-Wheel Drive

Current pricing: $46,990
Eligibility: Fully eligible — $7,500
As a brand new rear-wheel drive base configuration of Model Y built using Tesla’s next-generation 4680 battery cells produced at Giga Austin, Model Y All-Wheel Drive meets all of the criteria to qualify for the full clean vehicle tax credit today.

Model Y Long Range All-Wheel Drive

Current pricing: $49,990
Eligibility: Fully eligible — $7,500
While not utilizing 4680 cells produced in-house by Tesla, Model Y Long Range All-Wheel Drive nonetheless features lithium-ion battery cells produced by approved suppliers therefore keeping it eligible.

Model Y Performance

Current pricing: $53,990
Eligibility: Fully eligible — $7,500
Similarly, Model Y Performance utilizes lithium-ion cells produced by qualifying suppliers that don’t impact the tax credit eligibility despite more stringent guidelines.

Tesla Model S

Model S Dual Motor All-Wheel Drive

Current pricing: $87,490
Eligibility: Ineligible due to a MSRP limit of $55,000
Model S Dual Motor All-Wheel Drive remains ineligible due to a MSRP limit of $55,000 for sedans. However, pricing has increased to coincide with the addition of Free Supercharging for a total period of three years.

Model S Plaid Tri Motor All-Wheel Drive

Current pricing: $107,490
Eligibility: Ineligible due to a MSRP limit of $55,000
Model S Plaid Tri Motor All-Wheel Drive is also ineligible due to a MSRP limit of $55,000 for sedans. Furthermore, pricing has increased to coincide with the similar addition of Free Supercharging for a total period of three years.

Tesla Model X

Model X Dual Motor All-Wheel Drive

Current pricing: $97,490
Eligibility: Ineligible due to a MSRP limit of $80,000
Model X Dual Motor All-Wheel Drive continues to be ineligible due to a MSRP limit of $80,000 for SUV’s.
We do believe that Tesla could reduce pricing or introduce an additional base model of Model X that would qualify for the full tax credit as the limit is $80,000 for SUV’s, although with the recent price increase and addition of Free Supercharging for three years we do believe that could occur several years in the future rather than imminently.

Model X Plaid Tri Motor All-Wheel Drive

Current pricing: $107,490
Eligibility: Ineligible due to a MSRP limit of $80,000
As a performance-oriented configuration of Model X, we don’t foresee Model X Plaid Tri Motor All-Wheel Drive ever becoming eligible for the tax credit despite otherwise meeting battery sourcing and production criteria.

Q3: Cybertruck

While Cybertruck is slated for a launch event in Q3 2023, all signs are pointing to a higher-than-anticipated starting price which may make it ineligible for an $80,000 truck limit, but eligible down the line with future configurations.

What Should Buyers Keep in Mind?

All previous eligibility stipulations remain in place, including an income limit of $300,000 for joint filers, $225,000 for head-of-household filers, and $150,000 for single filers.
The tax credit continues to be realized at tax time, which in this case would be for the year 2023 by April of next year. This will eventually change to offering the option of a point-of-sale realization, but that’s one of the final aspects of the tax credit that’s still being worked out.

Conclusion

All Tesla Model 3 and Tesla Model Y configurations continue to qualify with the exception of Model 3 Rear-Wheel Drive, which qualifies to eligible buyers for a partial tax credit of $3,750 due to its battery production not meeting the finalized IRS guidelines.

Tesla should eventually circumvent this by moving a majority of its battery production including lithium-iron phosphate to North America and/or Japan, as well as sourcing battery materials from eligible countries.

Updated pricing as speculated makes all Model 3 and Model Y configurations relatively stellar values that are competitive within their segments, only complemented by the addition of the tax credit.

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