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Tesla Model 3 Qualifies for Full $7,500 Federal EV Tax Credit
Tesla has updated its website to reflect that all new Model 3 vehicles will now qualify for the full $7,500 federal EV tax credit. This comes after the U.S. Treasury Department began enforcing a critical material sourcing requirement in April, which led to many vehicle models losing their eligibility for the full tax credits they had previously qualified for.
The Two-Part Breakdown of the EV Tax Credit
The full $7,500 tax credit is broken down into two parts. Half of the tax credit, or $3,750, can be obtained if 50% of the value of battery components were produced or assembled in North America, while the other half requires 40% of the value of critical materials be sourced from the U.S. or another country under a free trade agreement with the U.S.
Treasury Department’s Enforcement of Critical Material Sourcing Requirement
When the tax credits commenced in January 2022, the Treasury Department held off publishing its guidance on battery sourcing in order to give electric vehicle manufacturers time to meet the requirements. However, on April 18, the department began enforcing the critical material sourcing requirement, which led to many vehicle models losing the full tax credits they had been eligible for in the first quarter of the year.
All Tesla Vehicles Eligible for Full Tax Credit
Unusually, all Tesla vehicles will qualify for the full $7,500 tax credit, as opposed to other automakers such as BMW, Rivian, Volvo, and Hyundai, which lost their tax credits entirely. The only Model 3 that qualified for the full tax credit prior to the change was the Model 3 Performance, but now all Model 3 vehicles are eligible for the full tax credit, including the long-range all-wheel drive and rear-wheel drive models. When the tax credit kicks in, the Model 3 rear-wheel drive now starts at $32,740.
Conclusion
Tesla’s change means that customers who purchase the Model 3 will be eligible for a federal tax credit of $7,500. Additionally, all Tesla vehicles will qualify for the full tax credit, which gives the company a significant advantage over other electric vehicle manufacturers whose vehicles no longer qualify for the full tax credits. This move by Tesla could attract buyers to the company’s vehicles and boost sales overall.
FAQs
What is the EV tax credit?
What are the requirements to qualify for the full tax credit?
To qualify for the full $7,500 tax credit, an EV must meet the following criteria:
- 50% of the value of battery components were produced or assembled in North America
- 40% of the value of critical materials be sourced from the U.S. or another country under a free trade agreement with the U.S.
Which Tesla vehicles qualify for the full tax credit?
Prior to the change, only the Model 3 Performance qualified for the full tax credit. But now, all Model 3 vehicles will be eligible for the full $7,500 tax credit.
What advantage does Tesla have over other EV manufacturers?
Tesla is the only electric vehicle manufacturer whose vehicles will qualify for the full $7,500 tax credit, giving the company a significant advantage over its competitors.
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