Tesla lost its US federal EV tax credit—specifically on some models in early 2024 and then more broadly in late 2025—due to strict, updated battery sourcing requirements under the Inflation Reduction Act and the expiration of incentives, which contributed to a 9% drop in 2025 sales. These rules, aimed at reducing reliance on China, disqualifying vehicles that failed to meet domestic battery, component, or critical mineral sourcing criteria.
In 2019, when a previous version of the EV tax credit was phased out for Tesla and General Motors because both hit a prescribed sales target, those two automakers responded by cutting prices. EV sales have been growing steadily for years, and at a much faster pace than traditional gas-powered cars.
As of the beginning of 2023, Tesla customers are once again eligible for the new tax credit of up to $7,500. That said, the vehicle must satisfy the manufacturing, pricing, and income requirements discussed in this article. Like other EVs, there will be no tax credits for any Tesla model after September 30, 2025.
The tax credit, passed by the Biden administration in 2022 to support EVs, is going away Wednesday as part of President Donald Trump's broad spending and tax bill.
Advancements in Technology
Tesla has always been on the cutting edge of what comes next in the automotive industry, which actually makes its vehicles depreciate faster. That's because as the technology advances in new models, the older ones tend to go out of date quickly.
Tesla paid $0 in federal income tax last year. 2022: $0 2021: $0 2020: $0 2019: $0 2018: $0 Tesla reported $6.7 billion in profit in those years.
For Elon Musk, 42 primarily signifies a nod to Douglas Adams' The Hitchhiker's Guide to the Galaxy, representing the "Answer to the Ultimate Question of Life, the Universe, and Everything," but also serves as a reminder to keep asking better questions about humanity's future, with SpaceX Starship's design incorporating it as a philosophical Easter egg. He uses it to link deep space exploration with existential inquiry, urging consciousness expansion to understand life's true meaning, beyond just the number.
Under the federal One Big Beautiful Bill Act, the $7,500 federal tax credit for new EVs and a $4,000 credit for used EVs expired on September 30, 2025, leaving buyers without a previously significant incentive to purchase these zero-emission vehicles.
Many used Teslas retain their advanced technology and features, making them a great value. Additionally, purchasing a used Tesla may allow you to access models that are no longer in production, such as older versions of the Model X or Model 3.
Yes, EVs tend to depreciate more quickly than ICE vehicles, but this gap is closing, and is set to match their depreciation level over time. There are several factors which contribute to this depreciation which will be outlined throughout this guide.
Tesla will need to continue to rely on government assistance to reach this level of success. Currently, Tesla sells their cars at a lower price than it costs to manufacture them. The company then recoups these costs through a wide array of government subsidies and tax credits, both to the company and its final product.
Tesla was at first excluded from the state's original tax credit program for EVs because the vehicle price was too high. The company then dropped the price on the models Y and S so they could be eligible.
“Tesla: The company has used mechanisms like deferred tax assets, research and development credits, and massive deductions from Elon Musk's stock-based compensation to reduce its U.S. federal income tax to near zero in profitable years.”
Yes, Tesla vehicles do break down from time to time. However, compared to cars that use internal combustion engines, Tesla remains a model of reliability. You can easily drive your electric vehicle for over 100 thousand kilometers, spending money only on replacing consumables and tires.