Tesla sees two Model 3s lose US tax credit eligibility, here’s what still qualifies

Now that we are into 2024, the US has updated the rules around the federal tax credit. As a result, two Model 3 variants no longer qualify, leaving an interesting pricing situation for the electric sedan, while other Tesla models and variants have seen their tax credit status remain the same into 2024.

These changes only apply to the US tax credit program, which takes into consideration where the car and its components were built (amongst other things), and and has no impact on the Canadian iZEV rebate prgoram, which is based largely on the vehicle’s price.

Last year Tesla warned on its Design Studio that the Model 3 Rear-Wheel Drive (RWD) and Long Range (LR) variants would no longer be eligible for the full $7,500 tax credit. At first Tesla said it would be reduced to half that amount, $3,750, before later updating their guidance to say it would lose the incentive entirely.

This change was confirmed on January 1, 2024, when the IRA updated their requirements and released the list of vehicles eligible for the credit, either in full or half. As suspected, the Model 3 RWD and LR both lost their $7,500 tax credit eligibility. This now means the Model 3 Performance, with the tax credit applied ($43,490), is cheaper than the Long Range ($45,990).

As for Tesla’s other vehicles, all three variants of the Model Y (RWD, AWD and Performance) and the Model X Long Range all still qualify for the full $7,500 tax credit. The Cybertruck is not included on the list yet, but the Cybertruck AWD is expected to qualify, although Tesla has likely not submitted it for approval as deliveries for that variant have not started yet.

Tesla wasn’t the only automaker to see changes to the status of their EVs, as the total number of EVs that qualify after January 1 has dropped by 50%, leaving only the Bolt EV and EUV, Ford F-150 Lightning (extended and standard range), and the Tesla models above eligible for the full $7,500 tax credit.

You can see the full list of eligible vehicles at FuelEconomy.gov.

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