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There exist some Tesla vehicles that are deemed suitable for federal electric vehicle (EV) tax credits, which possess the capability to reduce the price of a new vehicle by a maximum of $7,500. There are also vehicles within the Tesla lineup that are exempt from this benefit. Determining the eligibility on such vehicles can often be a challenge.
An intriguing twist is evident when comparing seemingly identical cars – a single Model 3, Model X, or Model Y might be eligible for the tax credit, while another might not, all due to the variance in the batteries they employ.
Tesla procures batteries from various suppliers. The batteries acquired from one supplier might meet the eligibility criteria, whereas those sourced from another supplier fail to qualify. To simplify the identification process for potential buyers, the automaker has now introduced an innovative search tool.
Related: Exploring the Mechanisms of Federal Electric Car Tax Credits
Discerning the Reasons Behind Limited Battery Eligibility
The section of the 2022 Inflation Reduction Act, drafted by Congress, governing the tax credits aims to foster the development of novel supply chains for essential battery minerals, which are predominantly imported from China. The regulations laid down in this act become progressively stringent with each passing year.
The tax credit bifurcates into two segments.
One segment necessitates automakers to fabricate a minimum of 60% of the battery within North America to access a $3,750 tax refund.
Electric vehicle batteries contain specific critical minerals. While some of these are rare, others are abundantly found in geological formations but are not conventionally mined in the volumes necessitated to power the anticipated millions of EVs.
To be eligible for an additional $3,750 rebate, automakers must ensure that at least 50% of the battery’s minerals are sourced from the U.S. or a nation having a free trade arrangement with the U.S.
Tesla’s battery procurement is diversified, involving suppliers like Panasonic and LG. Reports from Electrek suggest that Panasonic batteries are eligible for tax credits, while batteries from LG do not qualify.
Locating Credit-Eligible Vehicles
Visitors to Tesla’s website can now benefit from a slider feature when searching the inventory, facilitating the filtration of credit-eligible vehicles.
Several states have tax credit schemes in place that could potentially provide further discounts.
Potential Reasons for Passing on the Tax Credit
It’s important to note that not all vehicles meet the necessary criteria for the tax credit, similarly not all buyers qualify for it.
There are income restrictions that limit eligibility to single individuals earning up to $150,000, heads of households earning up to $225,000, and couples filing jointly earning up to $300,000.
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