Tesla Model 3 in US Now Qualifies for Full $7,500 Tax Credit

Tesla Model 3 in US Now Qualifies for Full $7,500 Tax Credit

Image: Tesla

All versions of Tesla Model 3 sold in the US now qualify for the full $7,500 tax credit. Previously, the only version that qualified for the entire credit was Model 3 Performance.

According to the changes on the Tesla website, all new Tesla Model 3 vehicles will now qualify for the full $7,500 federal tax credit. Electric vehicle tax credits have been approved as part of the Inflation Reduction Act, which aims to end US reliance on batteries made in China. Meanwhile, the act encourages the development of EVs by giving incentives to manufacturers who manufacture their EVs and batteries in North America.

The full $7,500 tax credit is divided into two parts. Electric vehicles can qualify for a $3,750 tax credit if 50% of the cost of the battery components were manufactured or assembled in North America. The other half may be paid if 40% of the cost of critical materials was received from the US or another free trade agreement country.

From January 1, before the requirements were clarified, many EVs in the U.S. gained access to full tax credit. However, since April 18, when the department began enforcing a critical material sourcing requirement, many car models have lost half or all of the tax credits they were eligible for in the first quarter of the year.

After that, only Model 3 Performance qualified for the full tax credit, with the remaining versions accessing $3,750. Tesla has now revealed that all Model 3s will be eligible for the full $7,500 credit. This means Model 3 RWD and Long Range are available for purchase with a $7,500 incentive. Model 3 RWD now starts at $32,740 with the tax credit. In some states with additional EV incentives, the Model 3 RWD costs even less than $30,000.

At the moment, it is not known for certain what changed that allowed Tesla Model 3 to receive the full tax credit. However, recent sightings indicate that the company is going to import all versions of Model 3 to Canada from China, meaning US production could be fully switched to meet US demand. It also means that Tesla probably provided the US-made Model 3 with IRA-compliant batteries.

© 2023, Eva Fox | Tesmanian. All rights reserved.


We appreciate your readership! Please share your thoughts in the comment section below. 

Article edited by @SmokeyShorts; follow him on Twitter

About the Author

Eva Fox

Eva Fox

Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.

Follow me on X

Reading next

SpaceX equipped Starship with Starlink antenna during first fully-integrated test flight, paving the way for Interplanetary Internet
Elon Musk to Speak at EEI 2023 Conference in June

Tesla Accessories