Tesla Model 3 tax credits reduced in 2024

author: FutureCar Staff    

Tesla has announced that starting in January 2024, two variants of the Model 3 electric sedan will no longer be eligible for the government’s full $7,500 tax credit. Customers who take delivery after December 31, 2023, will only receive half of that amount.

The company posted a note on its official website explaining that the tax credit will reduce to $3,750 for the Model 3 rear-wheel-drive and the Model 3 Long Range on January 1, 2024. The range-topping Model 3 Performance, however, will still be eligible for the full $7,500 tax credit. Tesla has not provided a reason for the change in eligibility for the lower trim levels.

The Department of Energy’s updated rules, announced in December 2023, may shed light on the reason behind the reduced tax credit. The department aims to exclude countries and companies labeled as “a foreign entity of concern” from American manufacturing. This means that electric cars powered by parts or chemicals made in China, Russia, North Korea, and Iran will not be eligible for the full $7,500 tax credit. The goal is to encourage the use of American-sourced materials in the manufacturing of electric cars.

Tesla also highlights that not everyone is eligible to claim a tax credit. The income limitations are set at $300,000 for married couples filing jointly, $225,000 for heads of households, and $150,000 for individuals. Additionally, there are price limitations for claiming the credit: buyers must spend less than $55,000 on a Model 3, less than $80,000 on a Model X, and less than $80,000 on a Model Y.

Unfortunately, those in the market for a Model S will not be able to claim a tax credit regardless of the delivery date or purchase price. The sedan’s base price of $74,990 exceeds the government’s limit of $55,000.