As of January 1, 2024, the U.S. Treasury’s revised guidelines for the federal electric vehicle (EV) tax credit have come into effect, reshaping the incentives landscape for electric car buyers. With Tesla, a prominent player in the EV market, facing changes to its eligibility, the Tesla Model 3 Long Range (LR) and Rear-Wheel-Drive (RWD) configurations are no longer eligible for the $7,500 tax credit. However, amidst this shift, one Model 3 configuration is emerging as a particularly attractive option – the Performance model.
The Performance Model 3, standing as the sole remaining eligible trim for the tax credit, now becomes the second most affordable configuration when factoring in the incentive. Notably, the Performance variant, even after the tax credit, is priced lower than the Model 3 LR. This alteration in eligibility raises interesting considerations for prospective Tesla buyers navigating the evolving tax landscape.
Here’s a breakdown of Tesla’s current Model 3 prices, inclusive of the tax credit:
- Model 3 RWD: $38,990 (no longer eligible)
- Model 3 LR: $45,990 (no longer eligible)
- Model 3 Performance: $43,490 (after $7,500 federal tax credit)
The shift in eligibility for Model 3 configurations coincides with the global rollout of the redesigned “Highland” Model 3, which has been making its way into auto markets worldwide. While the Highland hasn’t officially launched in North America, sightings of the Model 3 Highland in the U.S. suggest a potential imminent U.S. debut, and rumors circulate about a related Tesla announcement in the coming month.
Despite the changes in Model 3 eligibility, other Tesla vehicles maintain their qualification for the federal tax credit:
- Model X AWD: $72,490 (after $7,500 federal tax credit)
- Model Y RWD: $36,490 (after $7,500 federal tax credit)
- Model Y LR: $41,490 (after $7,500 federal tax credit)
- Model Y Performance: $44,990 (after $7,500 federal tax credit)
It’s essential to note that the tax credit imposes a maximum Manufacturer’s Suggested Retail Price (MSRP) cap of $80,000 for vans, SUVs, and pickups, and a separate cap of $55,000 for other EVs, as outlined by the IRS. Additionally, modified adjusted gross income (AGI) criteria are in place, with specific thresholds for different filing statuses.
Certain regions offer additional incentives, enhancing the savings potential for EV buyers. In Colorado, for instance, new EV purchases qualify for up to $5,000 in tax incentives, stackable with the federal credit.
However, it’s worth mentioning that, at present, the Tesla Cybertruck is not eligible for the federal incentive. While the exact reasons are unclear, it’s notable that the Cybertruck’s pricing exceeds the MSRP cap defined by the Inflation Reduction Act (IRA) credit. As the Cybertruck AWD begins deliveries in the future, there remains a possibility of it qualifying for the federal incentive over time, pending further developments in the EV market and regulatory landscape.