Electric Vehicle Tax Credits Starting to Phase-Out


The IRS announced that Tesla, Inc. has sold more than 200,000 vehicles eligible for the plug-in electric drive motor vehicle credit during the third quarter of 2018. This triggers a phase-out of the tax credit available for purchasers of new Tesla plug-in electric vehicles beginning January 1, 2019.

Qualifying vehicles by the manufacturer are eligible for a $7,500 credit if acquired before January 1, 2019. Beginning January 1, 2019, the credit will be $3,750 for Tesla’s eligible vehicles. On July 1, 2019, the credit will be reduced to $1,875 for the remainder of the year. After December 31, 2019, no credit will be available.

The plug-in electric drive motor vehicle credit was enacted in the Energy Improvement and Extension Act of 2008 and subsequently modified in later law. It provides a credit for eligible passenger vehicles and light trucks. By law, five quarters after reaching the sales threshold, the credit ends for the manufacturer. Tesla, Inc.’s vehicles are eligible for some portion of a credit until January 1, 2020.

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