Used Teslas now qualify for $4k tax credit, but there’s a tough hoop to jump through

Key Points

  • 😄 Used Teslas now qualify for a $4,000 tax credit through the Inflation Reduction Act (IRA).
  • 🚗 All four currently-available Tesla models and the Original Roadster are now eligible for the credit.
  • 📝 To qualify for the credit, the buyer must meet specific criteria, including being an individual who bought the vehicle for personal use, not being the original owner, and meeting income requirements.
  • 💰 Income thresholds for qualification are $150,000 for married filing jointly, $112,500 for heads of households, and $75,000 for all other filers.
  • 🛍️ The vehicle must have a sale price of $25,000 or less and a model year at least two years earlier than the purchase year.
  • 🔌 The vehicle must not have been transferred after August 16, 2022, to a qualified buyer, and it must be for use primarily in the United States.
  • 🚙 It must have a gross vehicle weight rating of less than 14,000 pounds and be an eligible fuel cell or plug-in electric vehicle with a battery capacity of at least 7-kilowatt hours.
  • 💸 Finding a Tesla for $25,000 or less is challenging, with the Tesla Model 3 having a significant year-over-year price change above the threshold.

Used Teslas will now qualify for the $4,000 tax credit through the Inflation Reduction Act (IRA) that is applicable for electric vehicles (EVs), Plug-In Hybrid Electric Vehicles (PHEVs), and Fuel Cell Electric Vehicles (FCEVs). However, there is one tough yet significant hoop to jump through for a used Tesla to qualify for the credit.

It appears that Tesla vehicles now qualify for the $4,000 credit based on what FuelEconomy.gov‘s website now states. Previously, the site’s list of pre-owned vehicles that qualify for the $4,000 credit was void of any Teslas.

Now, all four currently-available models and the Original Roadster appear on the list.

It was first spotted by InsideEVs.

There are a significant number of things that would qualify the vehicle and its buyer for the credit:

  • To qualify, the buyer must:
    • Be an individual who bought the vehicle for use and not for resale
    • Not be the original owner
    • Not be able to be claimed as a dependent on another person’s tax return
    • Not have claimed another used clean vehicle credit in the three years before the purchase date
  • Income Requirements are:
    • $150,000 for married filing jointly or a surviving spouse
    • $112,500 for heads of households
    • $75,000 for all other filers
  • For the vehicle to qualify for the credit:
    • It must be made by a qualified manufacturer. See IRS’s index of qualified manufacturers and vehicles.
      Note that fuel cell vehicles do not need to be made by a qualified manufacturer to be eligible. See Rev. Proc. 2022-42 for more detailed guidance.
    • It must have a sale price of $25,000 or less.
    • It must have a model year at least two years earlier than the calendar year when you buy it. For example, a vehicle purchased in 2023 must be a model year of 2021 or older.
    • It must not have already been transferred after August 16, 2022, to a qualified buyer.
    • It must be for use primarily in the United States.
    • It must have a gross vehicle weight rating of less than 14,000 pounds.
    • It must be an eligible fuel cell vehicle or plug-in electric vehicle with a battery capacity of at least 7-kilowatt hours.

Finding a Tesla for $25,000 is tough, especially at a dealership. Most recent data from iSeeCars lists the Tesla Model 3 as having the biggest year-over-year price change, gauging costs from June 2022 to June 2023.

The price change was 30.5 percent, equating to a $16,258 difference in price. However, this is well above the $25,000 threshold that is listed in order for it to qualify for the $4,000 tax credit.

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