The Tesla website has been updated to reflect that all new Model 3 vehicles will now qualify for the full $7,500 federal EV tax credit. This tax credit was introduced by Congress in August 2022 as part of the Inflation Reduction Act to reduce US reliance on China for batteries. The credit is split into two parts, with 50% of the value of battery components needing to be produced or assembled in North America to qualify for half, or $3,750, of the credit. The other half requires 40% of the value of critical materials to be sourced from the US or a free trade agreement country. The Treasury Dept. began enforcing the critical material sourcing requirement on April 18, leading to many vehicle models, including the Model 3, losing the full tax credits they were previously eligible for. However, Tesla’s Model 3 long-range all-wheel drive and rear-wheel drive will now qualify for the full tax credit, and the Model 3 rear-wheel drive will start at $32,740 with the credit. Although Tesla has not indicated why the eligibility for tax credits has changed, CEO Elon Musk has retweeted a screenshot of the website that displays the tax credits available for each vehicle. However, the Treasury Dept.’s website has not yet been updated to reflect Tesla’s increased eligibility for tax credits.
