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The $7,500 Tax Credit for Buying a Tesla Is Going Away

Andrew Moseman
Photo credit: Tesla

From Popular Mechanics

We knew this day would come.

Tesla Motors has now confirmed that it is close to selling its 200,000th electric vehicle in the United States. This is a huge deal: Crossing that threshold would trigger an automatic phase-out of the huge tax credit Americans have been receiving for buying a Tesla, and could make a whole lot of people on the waiting list for the more affordable Model 3 rethink whether to follow through with buying the car.

For years now, reporting on the price of an electric car has required a big caveat. Yes, the vehicles tend to be more expensive because of the new technology, but EV buyers receive a $7,500 tax credit from the U.S. government for investing in an electric.

However, that benefit is not indefinite. After any carmaker surpasses 200,000 electric vehicles sold, it would begin to lose that benefit. Six months afterward, the credit would drop by half to $3,750, and then to $1,875 six months later. Then it would disappear entirely.

The time has come for Tesla. As Electrek reports, the company just updated its Electric Vehicle Incentive page to reflect the new reality. Tesla now says the $7,500 credit will apply only to vehicles delivered by the end of 2018. Those delivered in the first half of 2019 will get only $3,750, while those delivered in the second half of 2019 will earn their buyers a tax credit of just $1,875-barely enough to offset the $1,500 option to get your Model 3 in red paint.

These competing timelines create a curious calculus for would-be Tesla buyers. Many people on the long waiting list for the Model 3 are holding out for the $35,000 base version, but Tesla is busy cranking out luxe versions of the 3 because they make more profit, and the cheaper car won't be available until late 2018 at least.

Those buyers now face a choice: They could opt for a higher-end Model 3 sooner, knowing that the $7,500 tax credit won't be available by the time their $35,000 car comes around. They could hold steady and hope Elon Musk keeps up the production pace, so they at least get their car with half of the tax credit they hoped for. Or, realizing that getting a Model 3 in the high $20,000s is a pipe dream, they could bail out entirely and ask for their deposit back.

There's an additional uncertainty hanging over this issue, which is the fate of the credit itself. Jalopnik reports that the springtime battle over President Trump's tax cuts nearly killed the credit entirely, if not for auto industry lobbying. GM, which is making its own electric push with cars like the Bolt (and also approaching the threshold), is calling for an expansion of the credit. But it may not find a welcoming climate in Washington.

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