Juliet Seva Auto 02.05.2023 22:Feb PM EST

Tesla's Model Y Increases Price After Updated Federal Tax Credit

The Long Range and Performance models' price increases to $2,000 and $1,000 respectively.

Price Increase After Price Cuts

Tesla, an automotive company, has quietly raised its price for the best-selling Model Y crossover. On their US website, Long Range and Performance models can now be bought at $54,990 and $57,990.

In early January of this year, it can be recalled that Tesla cut its vehicles' prices in the United States and Europe. The 5-seat Model Y Long Range initially dropped by 20%. From $65,990, it has been priced at $52,990. From the all-time low price, Long Range increased by $2,000 for every purchase. While the Performance variant is currently worth $1,000 more than it was from last month's price adjustment.

On Tesla's website, the company says that customers who take delivery and meet all federal requirements are eligible for a tax credit of up to $7,500. This credit can also be changed by March of 2023, at which point the value may be reduced.

Adjusted Gross Income Limitations include:

$300,000 for all married couples who will file jointly
$225,000 for all heads of households
$150,000 for the rest of other filers

The vehicle price at the time of delivery must not exceed the caps that have been set by Tesla. The vehicle price includes optional equipment physically attached to the vehicle but excludes software features, accessories, taxes, and fees.

The consumer's eligibility for any tax credits will also depend on their tax situation. This is why Tesla recommends users speak with a tax professional for help.

Federal Tax Credit

A tax credit is a financial benefit provided by the government to every consumer. It is a dollar-for-dollar reduction in the amount of taxes owed. For instance, claiming a $1,000 federal tax credit will reduce a person's federal income taxes due by $1,000.

If a person buys an electric vehicle (EV) or fuel cell vehicle (FCV) and meets certain income limitations, they could be eligible for a tax credit under Internal Revenue Code Section 30D.

According to The Wall Street Journal, Tesla's Model Y price spike comes after President Joe Biden modified the eligibility criteria concerning the $7,500 federal tax credit. This is to treat more vehicles as SUVs rather than sedans.

Before the update, consumers could get the full $7,500 Inflation Reduction Act incentive for the five-seat Model Y. This is if the consumer can configure the vehicle in a way that it can fall under the $55,000 sedan threshold. But today, all Model Y, including the Performance variant are falling under the $80,000 SUV ceiling.

The automaker company has not released a statement yet if the price increase of Model Y pricing is in response to Biden's announcement. Engadget says that with the Model Y now sitting under the $80,000 limit, Tesla will have more freedom to price the vehicle as it sees appropriate fit.