Tesla vehicles have been added to the eligibility list for the up to $4,000 used electric car credit. It should make used Tesla electric cars cheaper if you can find one under $25,000.

With the reform of the EV federal tax credit launched in 2023 came a new tax credit for used electric vehicles.

Interestingly, Tesla didn’t have any of its vehicles on the list of eligible vehicles when it launched.

It was clear why – though it is possible Tesla didn’t file for it as there’s not that much value for buyers considering the incentive only applies to used EV under $25,000, which is a pretty rare price point for used Tesla vehicles.

There are also a bunch of eligibility criteria on the buyer’s side:

  • Be an individual who bought the vehicle for use and not for resale
  • Must be an individual (no businesses)
  • Not be the original owner
  • Not be claimed as a dependent on another person’s tax return
  • Not have claimed another used clean vehicle credit in the 3 years before the EV purchase date
  • Modified adjusted gross income must not exceed $75k for individuals, $112,500 for heads of households, and $150k for joint returns

Here are the eligibility criteria on the vehicle’s side:

  • Have a sale price of $25,000 or less
  • Have a model year at least 2 years earlier than the calendar year when you buy it
    • For example, a vehicle purchased in 2023 would need a model year of 2021 or older
  • Not have already been transferred after August 16, 2022, to a qualified buyer
  • Have a gross vehicle weight rating of less than 14,000 pounds
  • Be an eligible FCV or plug-in EV with a battery capacity of least 7 kilowatt hours (kWh)
  • Be for use primarily in the United States
  • Purchased from a certified dealer:
    • For qualified used EVs, the dealer reports required information to you at the time of sale and to the IRS
  • A used vehicle qualifies for tax credit only once in its lifetime

If all these are met, buyers can get 30% percent of the sale price (up to $4,000) of tax credit.

Now more than half a year after the program was put in place, the IRS has added all Tesla models in the list of eligible EVs for the used EV tax credit:

Obviously, the big limiting factor will be the $25,000 max price tag. It is fairly rare to find a used Tesla under $25,000 aside from some of the oldest Model S vehicles and Model 3 vehicles with a lot of mileage on them.

Last month, we reported on Tesla vehicles leading a large drop in used EV prices, but despite a massive 30% drop, the average used Model 3 was still selling for $37,000.

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