Tesla Model 3 Long Range Now Eligible for Full $7,500 Tax Credit — Low Cost of Ownership Now
You can now buy the Tesla Model 3 Long Range in the United States and get the full $7500 federal tax credit. That is, of course, if you have that much tax liability. Consult a tax professional before counting on the full $7500 if you are not sure of your situation.
As a refresher (or for those who haven’t followed the history on this), when President Joe Biden and Democrats in the House and Senate expanded the federal tax credit for EVs when they passed the Inflation Reduction Act of 2022, they brought it back for Tesla. Tesla buyers had long lost access to the tax credit before that. However, there was another twist in the law — an EV model’s batteries and the components of those batteries couldn’t be produced in China or else the car couldn’t be eligible for the full tax credit. And that was the issue with the Tesla Model 3 Long Range — its batteries were being produced in China. The only Tesla Model 3 that had been eligible for the full tax credit before this week was the Model 3 Performance.
One funny result of this law when it came into full effect is that it became cheaper to buy a Tesla Model Y Long Range if you included the $7500 tax credit than to buy a Tesla Model 3 Long Range. Though, since then, the Model 3 got a big update (the “Highland” refresh/new design), so their starting prices are close anyway. Without the tax credit, the Model 3 Long Range (AWD) starts at $47,490. The Model Y Long Range (RWD) starts at $44,990 while the Model Y Long Range (AWD) starts at starts at $47,990, just $500 more than the Model 3 Long Range (AWD).
At the moment, these are the Tesla models eligible for the US EV tax credit:
So, yes, you can get the $7500 tax credit on any version of the Model Y, whereas you still can’t get the $7500 tax credit on the RWD version of the Model 3.
Jumping back to Tesla’s website, it’s fun to see what happens when you toggle on the option to include the full $7500 tax credit and estimated 5-years gas savings in the display price. when you do that, this is what you get for both the Model 3 and the Model Y:
There are actually several assumptions you have to make to come up with a 5-year cost of ownership estimate and savings estimate, including maintenance, insurance, and resale value/depreciation (the big one). Just dealing with gas costs and savings, one has to estimate miles driven per year, your average cost of gas across those 5 years, your average cost of electricity for charging across those 5 years (whether charging at home, at fast chargers, or elsewhere), and more if you really wanted to get nutty. In any case, these are Tesla’s generic savings estimates for the Model 3 and Model Y. In my opinion, sub-$35,000 prices for the Model Y and Model 3 are pretty wicked. These are great value-for-money cars — possibly the best on the market. And that’s why they both sell so well, of course. But could they sell better?
With the most popular Tesla Model 3 now eligible for the tax credit again, will there be a surge in Model 3 sales again? Or will the model continue to just coast along at its current pace since so many more buyers prefer the larger Model Y? We shall see. Naturally, Tesla was quick to highlight the tax credit boost and the low potential cost of ownership of the Tesla Model 3 and Model Y. The company sent me and others emails yesterday encouraging us to buy or lease the 3 or Y.
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