August 1, 2018 11:03 pm

Tax Credit Reduced for Tesla Electric Cars

If you buy an electric drive car, you may qualify for a tax credit of up to $7,500. However, the credit is reduced once the manufacturer has sold more than 200,000 cars in the U.S. Tesla reported that it reached this milestone for electric vehicles (EVs) in July 2018. What this means ( :

  • The full credit of $7,500 applies for a Tesla EV purchased in 2018.
  • The credit is $3,750 for a Tesla EV purchased in the first half of 2019.
  • The credit is $1,875 for a Tesla EV purchased in the second half of 2019.
  • No credit can be claimed for a Tesla EV purchased after 2019.

Note: GM is expected to surpass the 200,000 vehicle threshold later in 2018. The credit drops to 50% of the full limit in the second quarter after the quarter in which this threshold is attained, so if it isn’t achieved until December (the fourth quarter of 2018), the credit reduction would not start until the second quarter of 2019.

Tax Glossary

Qualified domestic relations order (QDRO)

A specialized domestic relations court order that conforms to IRS regulations and provides instructions to pension plan administrators and IRA custodians as to how to pay benefits to a divorced spouse.

More terms