Some Tesla vehicles are eligible for federal electric vehicle (EV) tax credits, which can reduce the price of a new car by as much as $7,500. Others are not. Identifying which is which is not always easy.
One Model 3, Model X, or Model Y can be eligible, while another near-identical car isn’t. The difference? The battery.
Tesla sources batteries from several suppliers. Those built by one supplier might be eligible, while those built by another aren’t. The automaker has a new search function that lets buyers identify eligible cars.
Related: How Do Federal Electric Car Tax Credits Work?
Why Only Some Batteries Are Eligible
Congress wrote the portion of 2022’s Inflation Reduction Act that controls the tax credits to help develop new supply chains for critical battery minerals, which today often come from China. It includes two sets of requirements that grow stricter over most years.
The tax credit has two parts.
One requires automakers to build at least 60% of the car’s battery in North America to qualify for a $3,750 tax rebate.
EV batteries use certain critical minerals. Some are rare, and others are common in geology but not traditionally mined in the quantities America will need to power millions of EVs.
To qualify for a second $3,750 rebate, automakers must build an EV’s battery with at least 50% of its minerals mined in the U.S. or a country with which the U.S. has a free trade agreement.
Tesla buys batteries from Panasonic and LG. According to Electrek, Panasonic batteries are credit-eligible, while LG batteries are not.
How to Find Them
Tesla’s website now includes a slider button in inventory searches that filters for credit-eligible cars.
Some states have tax credit programs that may add additional discounts.
Why You Might Pass On One
Not every car qualifies for the credit; not every buyer does, either.
Income requirements restrict the credit to single people earning up to $150,000, heads of households earning up to 225,000, and couples filing jointly earning up to $300,000.
