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Tax Credits Are Inconsistent With Tesla Model Y Vehicles - What the Difference Is

As we look at the upcoming IRA tax credit, there is an inconsistency with how the Model Y qualifies. It's very strange and here is how Tesla can get around it.


IRA Tax Credit for Tesla Model Y

According to the IRS, which has now released the entire list of electric vehicle models that are eligible for the new $7,500 US federeal tax credit, we see some very puzzling things related to the Model Y. First off, here are the vehicles that qualify for Tesla:

* Tesla Model 3 RWD: up to $55,000
* Tesla Model 3 Long Range up to $55,000
* Tesla Model Y AWD (7 seats) up to $80,000
* Tesla Model Y Long Range (7 seats) up to $80,000
* Tesla Model Y Performance (7 seats) up to $80,000
* Tesla Model Y AWD (5 seat) up to $55,000
* Tesla Model Y Long Range (5 seat) up to $55,000
* Tesla Model Y Performance (5 seat) up to $55,000

The Model S and the Model X do not qualify for this tax credit and are therefore not on the list because there prices are over $100,000.

Why the IRS is distinguishing between a 5 seat and 7 seat Model Y for an up to $55,000 or up to $80,000 tax credit is very puzzling and strange to me. It's the same car with just 2 extra seats.

The tax credit isn't even consistent among brands because the Ford Mustang Mach-E also is limited to $55,000 and it doesn't even have an option for a 3rd row to get to 7 seats.

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My opinion on this is that this is inconsistent and an annoyance for Tesla. The IRS should have all Model Y vehicles qualify up to $80,000 as an SUV. If they don't then here's what I think Tesla should do:

Tesla should sell the Model Y long range, 5 seat vehicle at a base price of $54,999. That should come with 250 miles of range. Then, Tesla should have a range upgrade that can be unlocked for $10,000 - or whatever is needed to get it to the normal price it is being sold at. This software upgrade will allow people to buy the Model Y at the tax credit price and still unlock the full value of it. The range upgrade gives the vehicle an extra 80 miles of range.

This is a hack that Tesla will have to do, but it will allow people to take advatnage of the tax credit for the Model Y. They can still drive it with 250 miles of range and most people will pay for the range upgrade, I think.

I think the Model 3 RWD standard range is going to start selling like hot cakes, especially if Tesla is able to find a way to boost its range closer to 300 miles and still use LFP batteries. Tesla and its Project Highland may be one of the most important projects it works on this year, even more important than the Cybertruck.

What do you think of the IRS and the tax credit? Is it strange that the Model Y is treated this way?

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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.

Image Credit, Tesla, Screenshot