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Tesla Cars to Retain Tax Credit Under Revised IRA Rules in US Except for Model 3 RWD

Tesla Cars to Retain Tax Credit Under Revised IRA Rules in US Except for Model 3 RWD

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Tesla vehicles will retain the EV tax credit under revised IRA rules. Model Y and Model 3, except for the RWD version, will receive the maximum credit amount. The new rules come into effect on April 18.

The US Department of the Treasury has announced it is revising its tax credit rules for electric vehicles (EV) under the Inflation Reduction Act (IRA). They are more stringent and will reduce or eliminate exemptions for many electric vehicle models that previously received them. The new rules will come into effect by April 18, 2023.

Days before the end of March, Tesla notified consumers that they had better buy and take delivery of its vehicles before the end of March, as the revised rules could go into effect starting April 1. With the publication of the rules on Saturday, some details have been clarified and the company has updated the information on the website. As expected, Tesla Model 3 Rear Wheel Drive (RWD) will no longer be eligible for the full $7,500 tax credit. However, consumers who have been eyeing the car have time until April 18 to complete their purchase and accept delivery and receive a $7,500 credit. It is worth noting that other vehicles, Model 3 and Model Y, are eligible for the federal tax credit.

Tesla notified consumers:

On January 1, 2023, the Inflation Reduction Act of 2022 qualified certain electric vehicles (EVs) for a tax credit of up to $7,500. Based on new IRS guidance, the $7,500 credit is now anticipated to be reduced for Model 3 Rear-Wheel Drive on April 18.

Qualifications include:

  • Customers must buy it for their own use, not for resale
  • Use the vehicle primarily in the U.S.
  • Adjusted Gross Income (“AGI”) limitations
  • MSRP price caps


Under the new rules, to be eligible for the full $7,500 tax credit, electric vehicles must meet two sets of criteria. If a vehicle meets only one of these two requirements, it is eligible for a halved tax credit of $3,750.

The first set of criteria requires at least 50% of the cost of battery components to be produced or manufactured in North America in FY 2023. The minimum percentage of the cost will increase annually to stimulate the development of the industry. The second set of criteria requires that at least 40% of the value of critical minerals used in a car be extracted, processed, and/or recycled domestically or in a country with which the US has a free trade agreement. The minerals include cobalt, copper, nickel, graphite, and lithium.

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

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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.

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