Eight Tesla models qualify for $7,500 US tax credit, but not all the ones you would think

With just a few days left in 2022 the Internal Revenue Service (IRS) has finally published the list of electric vehicles (EVs) that are eligible for the upcoming $7,500 tax credit brought about by the Inflation Reduction Act (IRA).

The tax credit will go into effect on January 1, 2023 and according to the list of eligible EVs only the Tesla Model 3 and Model Y will qualify for the federal subsidy. While that is not too surprising considering the high price tag of the Model S and Model X, what is surprising is that not all variants of the Model Y are considered an SUV, which comes with a higher MSRP limit.

Here are the Tesla vehicles that qualify for the US tax credit, along with their respective MSRP limit.

Model Year Vehicle Description Applicable MSRP Limit
2023 Tesla Model 3 Rear Wheel Drive $55,000
2023 Tesla Model 3 Long Range $55,000
2023 Tesla Model Y All-Wheel Drive – 7 seat variant (3-rows) $80,000
2023 Tesla Model Y Long Range – 7 seat variant (3-rows) $80,000
2023 Tesla Model Y Performance – 7 seat variant (3-rows) $80,000
2023 Tesla Model Y All-Wheel Drive – 5 seat variant (2-rows) $55,000
2023 Tesla Model Y Long Range – 5 seat variant (2-rows) $55,000
2023 Tesla Model Y Performance – 5 seat variant (2-rows) $55,000

As you can see, the IRS only considers the seven seat variants of the Model Y as an SUV, as they are the only one listed with the higher $80,000 MSRP limit for “vans, sport utility vehicles and pickup trucks.” The three five seat variants have the $55,000 MSRP limit which applies for “other vehicles.”

Making it even more confusing is the fact that Tesla doesn’t even make a seven seat version of the Model Y Performance, yet it is listed on the IRS website. So this is either a mistake or Tesla is about to add it to their Design Studio for customers to order.

Adding to the confusion is that the Ford Mustang Mach-E is also capped at $55,000, yet only the two AWD variants of the Volkswagen ID.4 are considered an SUV, even though they don’t have a seven seat configuration.

It is important to remember that this is just a tax credit, and not all owners will be able to take advantage of the full $7,500. If the amount of taxes owed on your next tax bill is $1,500, you will only be able to apply $1,500 of the credit. If your taxes owed are more than $7,500, then you can apply the full credit. There are also income limits that apply – $150,000USD for single filers, $300,000USD for joint tax filers, or $225,000USD for heads of households.

The full list of all eligible EVs can be found here. Some automakers have yet to submit their list of makes and models that are eligible, so keep an eye on the list as it will get updated as that information is received.

This list of eligible EVs and their applicable credits may also still be changed as the US government has delayed the release of their battery sourcing requirements until March 2023.

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