Tesla’s online configurator announces its new Model 3 has become the most affordable EV in the market. Until now the car was qualified for half of the federal tax credit, but now Model 3 qualifies for full federal tax credit. With this Model 3, it will now cost around $30,000 only, which makes it cheaper than Toyota Corolla and Honda Accord. In order to qualify for the tax credit, potential buyers need to meet certain criteria related to their adjusted gross income. Also, EVs need to have a certain percentage of their battery and component materials sourced from US and countries with free trade agreements.

After applying federal taxes, the starting price of Tesla Model 3 would be once again below $35,000. The company’s official website claims that every Model 3 is eligible for a full $7,000 federal tax credit in the United States. On 18-April-2023, these credits were cut in half for the entry level long and standard range RWD models.

Yesterday, Tesla announced that their most affordable Model 3 can now qualify for the full $7,500 federal tax credit, instead of just $3,750 like before. Buyers were able to access only half of the tax credits as batteries of the cheapest Tesla EV two Model 3 versions were sourced from China.

This came as a surprise to many buyers. Though unclear how they achieved it, this brought down the price of the Model 3 to an estimated $30,000.

Tesla’s Model 3 cars will be eligible for the full $7,500 federal tax credit, according to the company’s online configurator. Owning a Tesla Model 3 is now cheaper than owning a Honda Accord or Toyota Corolla in most markets with the application of federal tax credit for Model 3.

It is not clear how Tesla managed to do it, but they are now able to sell Model 3 RWD and Long Range AWD with battery cells made in the US or if there is a new deal allowing Chinese cells. So as per this new plan, buyers need to have an adjusted gross income of not more than: $300,000 for married couples filing jointly, $225,000 for household heads, or $150,000 for all other filers.

Though the company has not mentioned what actually changed, CEO Elon Musk retweeted a screenshot of the website displaying tax credits available for each vehicle. The Department of Treasury is yet to update its response on the newfound eligibility for tax credits by Tesla.

To qualify for the credits, 40% of EV batteries’ minerals must be processed or extracted in the United States. Also, 50% of their components must be assembled or manufactured in North America.

By 2027, it is expected that an increasing percentage of battery minerals and components must meet the requirements for vehicles to qualify for the credit. In fact, by that year, 80% of these components will need to meet those standards.

Vehicle Qualifications | Model 3 qualifies for full federal tax credit
Image by irs.gov

After the car components, it is essential to note that not every person will qualify for $7,500 and citizens need to have a certain income. Also, buyers need to wisely choose accessories to avoid hitting the price cap and get cheapest Tesla EV.

An EV can also qualify for half the federal tax credit ($3,750). This is applicable on EVs with 50% of battery components are assembled or produced in North America and 40% of critical materials are sourced from the United States or another country with which the U.S. have a free trade agreement. Under all these obligations how Model 3 qualifies for full federal tax credit?

With these rules, federal tax credit for Model 3 lost half of its car tax credit, while other carmakers such as BMW, Rivian, Volvo and Hyundai lost all of theirs.

Earlier, only Model 3 Performance was eligible but now Model 3 long-range AWD (all-wheel drive) and RWD (rear-wheel drive) are also qualified. With tax credits, the Tesla Model 3 RWD is now priced at $32,740.

Also Read: Elon Musk Teases 2 New Affordable Tesla EVs

Ahead of the refresh launch of Tesla Model 3 Tesla is offering bigger discounts on Model 3 inventory vehicles to sell them off. Tesla is offering a higher discount of $2,410 on new inventory Model 3 vehicles in the US. This comes after last month’s discount of $1,210.

It was estimated that Tesla might be trying to liquidate Model 3 completely before the launch of the refreshed version of its electric Sedan. Now, without incentives, the price begins at $37,830 and with $3,750 federal tax credits it will cost around $34,080. The price of the Model 3 that Tesla had in mind originally has been surpassed by the actual cost of the car. Plus, this brings the lease price down to $368/month.

Source: Tesla


Elliot is a passionate environmentalist and blogger who has dedicated his life to spreading awareness about conservation, green energy, and renewable energy. With a background in environmental science, he has a deep understanding of the issues facing our planet and is committed to educating others on how they can make a difference.

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