Incentives Watch: Buzz Over New Tesla is Electric, but Will Tax Breaks be Available?

The excitement over the new Tesla Model 3 is palpable. Everyone’s heard about people waiting in line to buy a car that will likely not be out until 2017. Although the $35,000 sticker price already seems like a good deal, it is even more palatable when you consider the federal tax credit, making the car $7,500 cheaper. Unfortunately, the federal credit starts to phase out once a manufacturer has sold 200,000 electric vehicles. After sales reach 200,000 for all Tesla vehicles, then the credit will be gone after six quarters, according to The Washington Post. This is potentially a problem for Tesla, as preorders for the Model 3 have already reached 276,000. However, Tesla’s CEO Elon Musk has tweeted that he is still confident that many buyers should get the credit, according to the Los Angeles Times.

However, consumers may still be able to qualify for state incentives, even if the federal credit is unavailable. Several states offer rebates for the purchase of electric vehicles. For example, California has the Clean Vehicle Rebate Program (CVRP), which offers incentives up to $6,500 for electric and plug-in hybrid vehicles. Although the Tesla Model 3 has not yet been approved for the CVRP, many similar vehicles, including other Tesla models, have qualified for a $2,500 rebate. On March 29, California implemented an income limit for the rebate. Single taxpayers who make over $250,000 and joint filers who make over $500,000 are no longer eligible for the rebate. Taxpayers whose income are less than 300 percent of the federal poverty line, however, are eligible for an increased rebate of $1,500.

But electric vehicle incentives are not necessarily going to be available in all states. Georgia previously offered an up to $5,000 tax credit for zero-emission vehicles, but the program ended on July 1, 2015. An attempt to revive the credit through H.B. 877 never really got off the ground. Utah’s Clean Fuel Vehicle Tax Credit program, which provides a $1,500 credit for electric vehicles, is scheduled to expire at the end of 2016. However, the program was enacted in 2008, and has been extended and revised several times, and so Utah taxpayers who want to buy a Tesla Model 3 in 2017 may still receive the credit.

The rise of electric vehicles does not just affect the customers of the cars, but also businesses that want to cater to electric vehicles. In New York, for example, a credit is available to taxpayers who invest in “electric vehicle recharging property.” The credit equals 50 percent of the cost of the property, up to a maximum of $5,000. If more recharging stations pop up, a New York resident could go on a road trip and find a “gas station” to juice up their Model 3 before exhausting its 215 mile range.

Although tax incentives for electric cars may remain uncertain into the future, their popularity may signal a shift away from traditional gas vehicles to something more environmentally-friendly. The excitement over the Tesla Model 3 shows that many consumers want electric cars, but it helps if the price tag is affordable.

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