Will my Tesla Model 3 qualify for the $7,500 federal tax credit?

Discussion in 'Model 3' started by Kyle, May 17, 2017.

  1. Kyle

    Kyle Member

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    #1 Kyle, May 17, 2017
    Last edited by a moderator: May 18, 2017
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    Tesla buyers that are looking to offset the price of their car should know that the $7,500 federal EV tax credit is on pace to reach its limit by the end of the year. But that doesn’t mean the credit will be fully gone by then.

    The federal incentive to purchase an electric vehicle comes in the form of a $7,500 tax credit. In order to qualify for this credit, one must have a tax burden of at least $7,500 and take ownership of a newly purchased electric car before the vehicle manufacturer reaches its 200,000th EV sold in the U.S. Tesla is quickly approaching this number and will likely hit the 200,000 mark, or beginning of the “phase-out” period, sometime in October of this year.

    Model 3 buyers who receive their cars in the quarter when Tesla delivers its 200,000th U.S. vehicle will receive the full $7,500 federal tax credit. The tax credit will drop by 50% two quarters after the 200,000th car is sold, and another 50% two quarters beyond that, before the tax credit is fully gone sometime around April 2019.

    Essentially, buyers who take delivery of their Teslas within roughly the first year-and-a-half of the company hitting its 200,000th electric vehicle delivery in the U.S. will be eligible for the tax credit. The closer to the 200,000th delivery date, the larger the credit.

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    So, what if you’re not part of the batch that’s able to receive the tax credit? A used Model S could be a good option considering they are selling for $45,000-$60,000 depending on the options. The Chevy Bolt is also a great option and sold at a price point more comparable to the Model 3. It packs an impressive 238 miles of range and bundled with high tech features and DC fast charging. Other manufacturers have also announced electric vehicle plans for 2018 that are guaranteed to be eligible for the federal tax credit.

    What are your thoughts on the federal tax credit running out? Are you relying on that credit for your Model 3 purchase or are you holding out for an EV from another manufacturer?



    Article: Will my Tesla Model 3 qualify for the $7,500 federal tax credit?
     
  2. Michael Russo

    Michael Russo Moderator

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    There does seem to be a bit of confusion between the text of the paragraph above and the content of Ben Sullins' video, from which the timeline example is taken.
    The easiest way to look at it - in this example- is to consider that all T≡SLA cars (Model S/X and Model ≡!) delivered by end of March 2018 would be eligible for the full $7,500 tax credit. If the 200k cumulative T≡SLA sales in the US would only be hit as if 1.1.18, the full tax credit could be obtained thru June 2018...

    Recommend you also watch the previous excellent video by Trevor Page from M3OC on same topic.

     
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  3. gene

    gene Moderator

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    There does seem to be some confusion on how it was worded. The full tax credit is still available after the end of the following two quarters of reaching the 200k mark.

    Like @Michael Russo mentions, if Tesla hit the 200k mark on Jan. 1, 2018, the full $7,500 tax credit could still be obtained until the end of June 2018 assuming the buyer takes "ownership" (delivery) of the car during that window of time.

    I made an edit on the original story to clarify this.
     
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  4. gene

    gene Moderator

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    Here's exactly how it reads on IRS.gov

    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 manufacturer’s 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.
    Thanks for the link @Ben Sullins

     
  5. Blue86

    Blue86 New Member

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    Here's what I think Tesla may do to maximize the buyers getting the full tax credit. Just before they hit 200,000 US sales in the 4th quarter (if they do) they stop sales in the US and starts sales in Canada first then Europe and Asia. Then sometime in the Q1 they start stockpiling cars. GM has 38 days of inventory right now so this would not be unusual to do. Tesla will stockpile and as many cars as they can make and store through the the end of Q1 and then deliver them in Q2. Q2 and Q3 will have deliveries exclusively to US customers and all the sales would qualify for the full $7,500 tax credit. Higher optioned cars would get priority.

    After Q3 2018, Tesla will offer discounts on options to make up for the $3750 reduction in tax credit for Q4 and Q1 2019. Assume they offer battery options rated at 220mi, 260mi, and 320mi with the 260mi pack a $4,000 option and AP2 also a $4,000 option. Both should be pretty popular options. These two options will be reduced by a total of $3,750 to make up for the tax credit reduction. This should take care of all of the current US Model 3 reservations. Depending on US demand, overseas sales will resume late in 2018 or in 2019 making up for the slack US demand as tax credits phase out. After tax credits phase out, the 260mi battery pack will become standard in the $35,000 base model to compete with the new EVs that are still getting the full tax credit.

    Incidentally, I don't think the base M3 will have a range much over the promised 215mi. With 400,000 reservations, why would they deliver more range in the base model then they had to? They very much need to keep profit margins as high as possible by encouraging the purchase of the larger battery packs. The Bolt is not competition, it is as Elon said, a compliance car with sales limited to about 25,000/yr.
     
  6. patrick0101

    patrick0101 New Member

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    Here's another possible scenario with Tesla hitting 200,000 US sales in 2018
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    from carswithcords.net (my blog)
     

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