Since new electric vehicles come with federal tax credits, many Tesla buyers wonder which models qualify. Tesla’s Model 3 qualifies for the full $7,500 tax credit across all trim levels. However, the Model S doesn’t qualify because it exceeds the $55,000 price limit for cars. The Model X and Model Y likely qualify as SUVs under the $80,000 threshold.
All vehicles must be assembled in North America and have a battery capacity of at least 7 kilowatt hours to receive any credit. Additionally, vehicles with battery components sourced from foreign entities of concern are ineligible starting in 2024.
Price matters considerably for tax credit eligibility. New cars must cost $55,000 or less, while SUVs, trucks, and vans must stay at $80,000 or less. These limits apply to the manufacturer’s suggested retail price, not the final sale price.
Used electric vehicles have a different rule. They must sell for $25,000 or less and qualify for up to $4,000 in tax credits. The binding purchase agreement signing date determines eligibility rather than the vehicle delivery date.
Tesla has made strategic adjustments to maintain credit eligibility. The company updated Model 3 specifications to guarantee full tax credit qualification. Tesla’s marketing efforts emphasize which configurations qualify for credits.
The company also created dedicated customer resources explaining the requirements.
A critical deadline is approaching. Vehicles placed in service after September 30, 2025 must be acquired by September 30, 2025 to qualify for credits. Tesla highlights this deadline on its webpage. Buyers should note that the vehicle must not have been transferred after August 16, 2022 to maintain eligibility for used vehicle credits.
Income limits also apply. Single filers can’t earn more than $75,000. Heads of households can’t exceed $112,500. Married couples filing jointly can’t surpass $150,000.
Taxpayers can use their modified adjusted gross income from either the purchase year or the previous year, whichever is lower. People claimed as dependents on another tax return don’t qualify.
Used Tesla purchases have additional requirements. The vehicle must be at least two years older than the calendar year of purchase. Buyers must purchase from a licensed dealer registered with the IRS.
The vehicle can’t have been transferred to a qualified buyer after August 16, 2022.
Sellers must provide documentation including vehicle identification numbers, battery capacity specifications, and maximum tax credit amounts. This paperwork helps guarantee buyers receive proper credit eligibility verification.