Tesla Model 3 Buyers Might Not Be Eligible for Tax Credits
Tesla Model 3 buyers might not get to take advantage of the $7,500 federal tax credit for electric vehicles.
As shoppers line up worldwide to be one of the first ones on the Tesla Model 3 order list, buyers in the U.S. might want to assume its final price tag will exclude the federal tax credit. One reason why Tesla Model 3 buyers might not be eligible is because the federal credit under Internal Revenue Code Section 30D begins to decrease once an automaker has sold 200,000 qualifying electric vehicles in the U.S.
Although Tesla doesn’t outright say how many vehicles it sells per country, its most recent letter to shareholders said it sold 42,000 Model S sedans in the U.S. in 2014 and 2015. The American automaker expects to deliver between 80,000 to 90,000 vehicles this year, and adding up all those figures including what Tesla sold in 2012 and 2013, the company will be close to the 200,000 mark by 2018 – when the Tesla Model 3 is expected to be readily available.
SEE ALSO: Watch the Tesla Model 3 Live Debut Here
Once Tesla sells 200,000 vehicles, the tax credit program enters a “phase out period,” which is when the tax credits get reduced to 50 percent over the next six months before dropping to 25 percent over the following six months. Analysts believe that Tesla will reach the cutoff mark by 2018. Naturally, if the Model 3 gets delayed, that means Tesla is accumulating more Model S and Model X sales, inching it closer to the 200,000 mark.
Another aspect to take into account if you’re a potential Tesla Model 3 buyer is whether you will fall into the same high income bracket as Model S and Model X buyers. According to Evan Niu of The Motley Fool, “The $7,500 credit can only be applied if the customer has a tax liability of $7,500 or more, and any unused portion is not refundable and can not be carried forward.” That likely means anyone taking home $50,000 annually or less may not qualify for the full $7,500 tax credit.
The American electric automaker will show off the Tesla Model 3 this evening, but CEO Elon Musk has said that it is just “part 1” of the debut, meaning we will likely see a concept vehicle and not a production model.
[Source: Teslarati]
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Jason Siu began his career in automotive journalism in 2003 with Modified Magazine, a property previously held by VerticalScope. As the West Coast Editor, he played a pivotal role while also extending his expertise to Modified Luxury & Exotics and Modified Mustangs. Beyond his editorial work, Jason authored two notable Cartech books. His tenure at AutoGuide.com saw him immersed in the daily news cycle, yet his passion for hands-on evaluation led him to focus on testing and product reviews, offering well-rounded recommendations to AutoGuide readers. Currently, as the Content Director for VerticalScope, Jason spearheads the content strategy for an array of online publications, a role that has him at the helm of ensuring quality and consistency across the board.
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The 1-year phase out begins the second calendar quarter after the 200,000th US EV is sold. So if the 200,000th is sold in July 2018, the phase out doesn't start until Jan 1, 2019, at which the max is $3750 for 6 months.
From IRS website: Qualified Plug-In Electric Drive Motor Vehicle Credit (IRC 30D) Phase Out The qualified plug-in electric drive motor vehicle credit phases out for a manufacturers vehicles over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (phase-out period). Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period. Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period.