Used Tesla Vehicles May Now Quality For $4,000 Tax Credit

Used Tesla Inc TSLA vehicles could now be eligible for a federal tax credit of up to $4,000, according to updated guidance from the Internal Revenue Service (IRS).

This change could be a significant boost for prospective Tesla buyers looking to enter the electric vehicle (EV) market at a lower price point.

As InsideEVs reports, the used EV tax credit, which was part of the Inflation Reduction Act, provides up to $4,000 for used EVs; plug-in hybrid electric vehicles (PHEVs), as long as they have a battery of at least 7kWh; and fuel cell electric vehicles (FCEVs) sold for under $25,000 and are at least two years old.

More tax credit specific so far include individuals have to earn less than $75,000 annually to claim it, with the thresholds increasing to $112,500 for heads of households and $150,000 for joint filers; cars that cost $13,333 or less will only have 30% of their price covered by the tax credit; and the credit is not available for a vehicle if a previous owner has already claimed it.

Used Tesla cars were not previously on the IRS's list of qualifying vehicles and the recent IRS update dated Aug. 3, 2023, pointed to the Environmental Protection Agency's (EPA) website, where all Tesla models appeared to be potential candidates for the tax credit.

While the IRS hadn't explicitly confirmed the eligibility of used Tesla vehicles for this tax credit, the new direction suggested a possible change in their status.

More clarity is expected as the IRS and Tesla release additional information on this matter. Notably, many early Tesla Model S sedans could meet the criteria for this tax credit, but there may be a limited supply of qualifying sub-$25,000 Tesla Model 3s.

Photo: Courtesy Tesla