Clean Transport

Published on August 19th, 2014 | by Christopher DeMorro


Tesla Owner Tax Rebates Could Total $1.5 Billion

August 19th, 2014 by  


Originally posted on GAS2

With a starting price of around $70,000, the Tesla Model S costs more than twice the average new car transaction price in the U.S. Those well-off to be able to buy one though also get a generous $7,500 Federal tax rebate, on top of any state incentives, taking a sizable chunk off of the MSRP even on the better-equipped versions.

All this government money will add up, and by the time the $7,500 tax credit phases out, Tesla owners could end up claiming more than $1.5 billion. By the time the Tesla Model III rolls out, there might not be many Tesla tax credits left.

The IRS has imposed a 200,000 unit per manufacturer limit on the credit, of which Tesla owners may have claimed as many as 60,000 by the end of this year. It’s hard to know for sure, as Tesla doesn’t release detailed sales figures, so it’s hard to know how many Teslas are sold in America, versus Europe, China, and the rest of the world. If Tesla manages to stick with its aggressive timeline though, it will produce 75,000 vehicles in 2015, and 100,000 in 2016. The IRS only says that the credit runs out after production of 200,000 plug-in vehicles, not 200,000 rebates, which means that by the time the $35,000 Tesla Model III won’t be eligible for that $7,500 discount.

Instead, only buyers who can afford to plunk down $70,000+ on a Model X or Model S will be able to take advantage of the program, and if all of them do, it would cost taxpayers $1.5 billion. This includes a number of celebrities like rapper/producer Jay-Z, NBA player Mike Conley, actor Seth Green, and actress Cameron Diaz. Many of these people could have afforded to buy the Model S regardless, but I’d be surprised if any of their accountants didn’t take advantage of the tax credits.

There’s also numerous state incentives to consider, which in California is an additional $2,500 and in Georgia is a heady $5,000 per vehicle. Of course this assumes each and every Tesla owner is in the U.S., and actually claims the tax credit. California is also considering an amendment that would tie the state rebate to income levels, but nothing like that has been proposed on the national level.

Of course the Model S isn’t the only EV with access to incentives; both the Chevy Volt and Nissan LEAF can take full advantage of the $7,500 tax credit, and both have racked up substantial sales as well. But Tesla seems to have the wind at its back, and could exhaust its tax rebates before either vehicle, and at a substantial cost. As of May, Nissan had sold an estimated 50,000 LEAF EVs in the U.S.; Tesla is probably close to that, even though the LEAF enjoyed more than a year head start.

One could make the argument that the government has helped pave the way for Tesla’s success, especially when you add in the $465 million low-interest government loan Tesla used to get started. Granted, Tesla paid it back early, and other automakers got even more assistance from the same loan program, but it still helped Tesla, perhaps immeasurably. As an advocate for EVs, I certainly feel like it’s the right thing to do, especially given the embedded advantages petrol-powered cars enjoy…but as a taxpayer, it still gets under my skin a little bit that by the time a Tesla I can afford goes on the market, the rich people will probably have used all the tax credits up. And if you ask me, I’m allowed to think it’s a good idea, and still be a little bit bothered by it. I guess I shoulda made my first million by now.

Tell me your thoughts on Tesla’s generous tax subsidies; is it money well spent, or just more hidden corporate welfare?

Check out our new 93-page EV report, based on over 2,000 surveys collected from EV drivers in 49 of 50 US states, 26 European countries, and 9 Canadian provinces.

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About the Author

A writer and gearhead who loves all things automotive, from hybrids to HEMIs, can be found wrenching or writing- or else, he's running, because he's one of those crazy people who gets enjoyment from running insane distances.

  • maifriend

    It doesn’t cost tax payers $1.5B. It’s money that Mr Tax collector doesn’t collect.

    • liuping

      This is an important distinction that people often forget. It’s just lowering the amount of taxes I paid. I still paid plenty…

      If you want to look at a really large amount of tax revenue lost, look at the home mortgage interest deduction. That’s $70 billion EVERY year, not $1.5 billion over the life of the car company

      • Bob_Wallace

        It is “taxes uncollected”.

        But more important it is an investment in our future. A future that should help us stop wasting the hundreds of millions we spend daily to import oil, to stay of the conflicts like the three oil wars that cost us roughly $9 trillion, and the incredibly enormous amount of money that extreme climate change could cost.

        It’s a tiny, tiny, tiny investment which should lead to humongous returns.

    • Mint

      And the benefits are huge.

      Every Model S will likely drive an average of >200k miles over its lifetime, and it displaces a ~20 MPG big performance sedan. So that’s 10,000 gallons of gasoline not purchased ($40k/car), and 300+ barrels of oil not imported ($30k/car).

      So the US gov’t loses $1.5B in revenue, but that money both stays with US consumers AND prevents $6B from leaving the economy to the Middle East.

      Pretty amazing deal.

      • Bob_Wallace

        Good way to look at it. All that extra cash washing around in our economy make for GDP growth.

      • falstaff77

        “and 300+ barrels of oil not imported “

        US imports are half of consumption now, a third if not counting Canada and Mexico. Non-N. American oil imports are on trend to zero before 2020.

  • Oil4AsphaltOnly

    Your innuendo is sensationalist. Every car manufacturer who produces an EV will enjoy the same $1.5 billion benefit, as they have the same $7,500 limit on the same 200,000 of cars. Tesla using up their allotment won’t take any money away from buyer’s of Nissan Leaf’s and Chevy Volt’s from getting their tax credit.

    As for buyers who do NOT qualify for the credit, [they] didn’t pay enough taxes to get it in the first place! For those buyers, leasing the Leaf or Volt for 3 years would permit them to take advantage of the federal tax credit (but not the state one) without having paid ANY federal taxes! Or how it’s being used to subsidize an EREV, or a foreign automanufacturer instead of an american one. Why aren’t you up in arms about those little loopholes?

    Tax fairness aside, the EV tax credit is doing it’s job in luring people into trying EV’s and learning first hand how much better they are than ICE’s. Regardless of the manufacturer.

    Mr. DeMorro, your bias is disgusting.

    • NRG4All


    • falstaff77

      “‘Tax fairness aside, the EV tax credit is doing it’s job in luring people into trying EV’s and learning first hand how much better they are than ICE’s.”

      Why don’t you take upon yourself to finance a “lure” for people into EVs. As it is, I’ll make do with a thank you for those receiving the largess of my tax dollars via theses credits, but if its all the same I’d rather just decline to pay for anyone else’s car.

      • Bob_Wallace

        All your life you have benefited from investments made by those who proceeded you.

        Now you aren’t willing to pay anything back and invest in the future for others?

        • falstaff77

          Amazing, the self regard you display. Yes only the methods *you* approve qualify as pay back, only the ideas *you* approve of qualify as investment. I get it. Sorry I’m not fooled by the red cape in which you dance around.

          • Bob_Wallace

            There’s nothing in my comment about stuff I approve of or not.

            What I don’t approve of are people who benefit from what others have done but then don’t want to do their fair share in return.

          • falstaff77

            Sure there is. I say I don’t want to pay for other people’s cars, and you respond that I don’t pay “anything” back.

          • Bob_Wallace

            Government suppliments for EVs are investments that will help to make EVs affordable for all of us. The people who are buying EVs now are paying a higher price that what EVs will cost, which means that they are also spending money to help bring down the costs.

            You didn’t paid for the hospital you were born in and for the education of the medical staff that delivered you. As well as for the public utilities that kept you from dying of disease as an infant.

            It’s now time to get us off fossil fuels. And we can do that while saving ourselves money on future cars and operating costs. Time to quit bellyaching and being a taker. Time to kick in for the common good.

          • falstaff77

            So you did indeed know what you were doing. Liar.

          • Bob_Wallace

            Know what I was doing?

            Generally I do.

            Did I lie? No.

  • Shiggity

    I live around Chicago and I typically see a Model S every single day. You get 4k back in IL on top of the $7500.

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