Tesla Model Y Sales Skyrocket With Changes In US Tax Credit Structure

The altered US tax credit rules became a blessing in disguise for Tesla’s Model Y customers, whose dream of a Tesla EV became much cheaper than before.

How Has The Tax Credits Changed?

To shift the supply chain for electric vehicles in the United States away from China, the Treasury released recommendations in December 2023 that included additional restrictions for the sourcing of batteries. There are now 19 EV models that are eligible for U.S. EV tax credits, down from 43 previously . These numbers comprise various iterations of the same car model. According to the Treasury, the list may vary since some manufacturers have not yet submitted data on qualifying automobiles.

Under the new regulations, purchasers can claim a $7,500 tax credit at the moment of sale at a dealership that is a participating dealer.

A new tab will open with the Volkswagen ID.4, Tesla Model 3 Rear Wheel Drive, and BMW X5 xDrive50e (BMWG.DE). Among the automobiles that were removed from the list of qualifying models for tax incentives were the Audi Q5 PHEV 55, Cadillac Lyriq, and Ford E-Transit.

Impact On Tesla’s Model Y

Since the EV tycoon confirmed on its website that it can add the point-of-sale rebate to the purchase price, buyers of Tesla electric vehicles (EVs) can now directly benefit from the $7,500 federal tax credit when purchasing a new Model Y. That is, the actual purchase price of Model Y has been reduced.

Hence, purchasers of this specific Tesla model will not be required to pay the entire set price and then wait for their tax burden to be reduced or eliminated by the IRS following the proper filing of federal tax income forms.

In the scenario where the purchasers qualify for the complete tax deduction, the dealer, in this example, Tesla, can apply the credit to the purchase price at the time of delivery and receive its money back from the federal government.

The buyer bears the obligation of making sure all the requirements are fulfilled; if not, the IRS will request that the tax credit be reimbursed. The Model Y’s MSRP cannot exceed $80,000 when purchased from Tesla. Additionally, the following adjusted gross income (AGI) thresholds must be satisfied: $300,000 for heads of household, $225,000 for married couples filing jointly, and $150,000 for all other filers.

Model Y Sales Hike

The first quarter 2024 sales figures from various reports also showed that the global market for electric vehicles suffered. Even though Tesla too faced a slowdown and was unable to deliver all of the vehicles it produced in the first quarter of this year, its Model Y remained by far the most well-liked electric vehicle in the US. In  the first few months of 2024, 268,909 EVs were purchased by Americans, with almost one-third being Tesla Model Ys. Sales of Model Ys comprised 35.4% of the US EV market in just the first quarter, with Model 3s coming in second at 11.3%.