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: Tesla’s U.S. price cuts mean more models are eligible for federal EV tax credit

Tesla cut prices on its most popular electric cars in the U.S. and Europe by as much as 20% in a bid to spur slackening demand. For U.S. buyers, that means more Tesla models, including some with more options, now qualify for the tax incentives that kicked in on Jan. 1.

Price cuts were posted to Tesla’s
TSLA,
-1.20%

website late Thursday.

Related: Tesla shares under pressure after EV maker slashes prices of Model 3 and Y cars in the U.S.

For some of the lower-priced models, the cuts put them in range to qualify for U.S. federal tax credits of up to $7,500 on new electric vehicles (EV). Those incentives were made available starting Jan. 1 under the Inflation Reduction Act. The credit is available on EVs priced under $55,000.

Read: Thinking about an EV? First-ever $4,000 tax credit for used electric vehicles, and $7,500 for new, gets OK from Congress

As for Tesla, the price for a long-range all-wheel-drive Model Y was dropped to $52,990 from $65,990 — a 19.7% discount, The Model Y’s performance model was cut by 18.6% to $56,990 from $69,990.

A standard-range rear-wheel-drive Model 3, the lowest-priced version, now lists at $43,990 from a prior $46,990, which represents a 6.4% drop. The higher-end Model 3 performance was discounted by 14.3%, to $53,990 from $62,990.

Read: Want that $7,500 EV tax break? Why buyers need to talk with an accountant and not just a car dealer

The Inflation Reduction Act signed in August 2022 includes tax credits for all-electric vehicles and plug-in gas/electric hybrids that essentially gave new life to an old program meant to get more Americans into EVs on the way to a zero-emission future. The new law made it easier for used-car buyers and those taking on a lease to get some breaks as well.

The new tax credits can help defray the cost of buying a zero-emission vehicle, especially when combined with select state and local rebates. The federal government continues to update its list of qualifying vehicles and because of strong demand and supply-chain shortages on some parts, many would-be buyers are finding they have to order new cars well in advance.

Importantly for some manufacturers, the IRA left out a 200,000-vehicle-per-manufacturer cap that had limited the incentives for new buyers. Restarting the tally means that Tesla, GM
GM,
-5.10%

 and Toyota
TM,
-1.62%
,
 which had all reached the cap, can lure buyers with this tax break yet again.

Don’t missGM has ‘pivotal’ months ahead, Wall Street says

In addition to the $7,500 credit for new models that qualify, the first-ever used-EV tax credit is worth either $4,000 or 30% of the auto’s price, whichever is less. The price cap of qualifying pre-owned vehicles is $25,000.

There are conditions. For instance, qualifying EVs must include a battery that features a large percentage of components that were manufactured or assembled in North America. 

Credits are capped to an income level of $150,000 for a single filing taxpayer and $300,000 for joint filers for new vehicles and at $75,000 and $150,000 for used cars.

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