The new EV tax credit will only apply to some Teslas
Tesla
The Inflation Reduction Act (a sweeping $750 billion health care, tax and climate bill) was signed into law by President Joe Biden.
Included in the package are some incentives that will make buying electric cars in the US more affordable. The caveat is some of the most popular EVs being sold won’t see any difference.
A tax credit of up to $7,500 will be offered to purchasers of new all-electric vehicles and hybrid plug-in vehicles through 2032. For used versions of these vehicles, the plan would also establish a supplementary tax credit worth a maximum of $4,000.
However, the legislation also introduces additional restrictions on who can be eligible for the credit and which vehicles are eligible for it.
For brand-new cars, the manufacturer's suggested retail price for sedans must be less than $55,000 in order to qualify for the tax credit. For SUVs, trucks and vans, the maximum price would be $80,000.
That price cap effectively leaves out the Tesla Model X and Model S, which start at over $100,000, alongside other premium vehicles like the Mercedes EQS, Porsche Taycan, and GMC Hummer. Some of the more expensive configurations of the Tesla Model 3 won't qualify either.
Which Tesla Models Qualify
The only Model 3 that would currently qualify is the entry-level, rear-wheel drive model, which costs around $47,000. This model would be able to take full advantage of the federal tax credit.
Tesla recently discontinued orders for the all-wheel drive Model 3 Long Range model, which could have made the $55,000 cutoff if it received a small price reduction. It'll be interesting to see if Tesla begins to offer that model again in the near future.
The Model 3 rear-wheel drive is the only Tesla that is currently sold for under $55,000. Luckily Tesla's Model Y vehicles are classified as SUVs and will also classify under the truck, vans and SUV portion of the tax credit.
Since SUVs can cost up to $80,000 USD and still qualify for the full tax credit, both Model Ys will qualify as well, including the Performance model which currently comes in at just under $70,000.
Model
Price
Qualifies
Model 3 RWD
$46,990
Model 3 Performance
$62,990
Model Y Long Range (AWD)
$65,990
Model Y Performance
$69,990
Model S
$104,990
Model S Plaid
$135,990
Model X
$120,990
Model X Plaid
$138,990
This is significant, given that the Model Y and Model 3 are currently the most popular EVs in the United States. In the first half of 2022, more Model Y and Model 3s were sold in the United States than the combined sales of the next ten most popular EVs.
Used electric vehicles must be at least two model years old in order to qualify. The price cap would be $25,000 and the credit would be limited to the lesser of $4,000 or 30% of the cost of the vehicle.
Other hurdles include a requirement for the final assembly needs to be in North America. That should exclude EVs manufactured by Hyundai Motor, Kia, Audi, and Polestar Automotive. Those firms assemble EVs sold in the U.S. in Asia and Europe.
Additionally, the criteria for the EV purchase credit will alter. For instance, there are specifications for the locations of battery pack assembly and the sourcing of battery components. Those specifications appear to be intended to strengthen the American EV supply chain. Around 2024, these new complexities go into effect. The list of approved automobiles is maintained by the Treasury Department.
It's important to note that the existing $7,500 tax credit, which was established in 2008 and 2009 in order to encourage the adoption of electric cars, included a phase-out provision that would apply if a manufacturer sold 200,000 of the vehicles.
Tesla reached that mark in 2018, and as of right now, its electric vehicles are not eligible for the tax credit. The same applies to General Motors and Toyota (including its Lexus brand). But thanks to the revised bill's removal of the 200,000 sales cap, their electric cars would once again be eligible for the credit.
Additionally, single taxpayers with modified adjusted gross income beyond $150,000 would not be eligible for the credit. This income cap would be $300,000 for married couples filing jointly and $225,000 for single people filing as heads of household.
It might seem like a smart idea to purchase an electric vehicle right now given all the changes to the EV tax credit. However, bear in mind that several benefits, such as the removal of manufacturer limitations and the application of the credit at the time of sale, won't take effect until 2024 or the next year.
Even though this modification to the tax incentives will make the already difficult to navigate EV market much more complicated in the immediate term, in the long term it will be great news for customers, especially middle-class mainstream consumers who later on can purchase more affordable EVs.
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Tesla has begun reaching out to customers to replace the high-voltage battery pack seals in Model S and Model X vehicles manufactured between 2021 and 2022. In particular, this impacts vehicles between January 2021 and September 22, 2022.
Tesla is notifying impacted owners through a notification and message in the Tesla app.
Plunger Replacement
The high-voltage battery port plungers intended for internal water leak egress (also known as flood ports) are being replaced with improved parts. The new parts are designed to be more robust against external water ingress due to submersion during flooding or other high-severity water impacts.
Tesla specifically notes that no action is needed from owners at this time - once the parts are available, owners will be notified with a notification from the app to encourage them to schedule a service appointment.
This voluntary recall is likely related to the incident where the fully submerged Model X caught on fire underwater, requiring first responders to wait for the battery to burn out before recovering the vehicle. That incident occurred back in October 2023.
While Submarine Mode is a fun Easter Egg, it doesn’t actually improve your vehicle’s water rating.
Service Details
Taking a look at the Service Bulletin (SB-25-16-002), Tesla will be replacing all five flood ports and, if necessary, the breather plugs and flood port doors. Tesla will require you to take your vehicle in for this appointment, which should take approximately 90 minutes for the Model S, and approximately 60 minutes for the Model X. Tesla’s Mobile Rangers won’t be able to complete this activity in your driveway.
The part being replaced is the plug.
Not a Tesla App
Because this is a voluntary recall, Tesla will be offering this as a goodwill service for any owners who have exceeded their Model S or Model X limited battery warranty - so don’t hesitate to take your vehicle in.
Following a period of radio silence from Tesla on FSD updates, Elon Musk has finally hinted that progress is continuing behind the scenes on FSD and that “Several major improvements are incoming.” We’re pretty excited - it has been over 100 days since the last FSD update, and we haven’t heard much since then.
The latest versions of FSD were V13.2.8 for AI4 vehicles and V12.6.2 for HW3 vehicles, both of which were released in January of this year — almost four months ago. While development has been ongoing internally, many have been wondering what the next public release will be. Will it be FSD V13.3, or will we jump straight to FSD V14.
Decoupled Releases & Spring Update
Tesla has now begun pushing Early Access users the 2025 Spring Update without an FSD version change. This means that we can expect the next FSD update to likely be based on the 2025.14 branch.
It’s worth noting that Tesla can add improvements to FSD at any time - and sometimes they do make minor changes without incrementing release numbers - small flag changes in FSD’s software to address how it does a specific task, or what data is uploaded.
With all that said, we expect the Spring Update to begin going out to more of the fleet in the coming days. We’re currently seeing about 58% of the fleet on the Spring Update, and only 30% of the fleet on the older 2025.8 January Update.
Not A Tesla App received information that an upcoming update was set to bring features from other AI4 vehicles to the Cybertruck, including Start FSD from Park, Unpark, Actually Smart Summon, and more. This update was intended to bring it closer to feature parity with the rest of Tesla’s AI4 fleet, but for now, Cybertruck remains the redheaded stepchild of the fleet.
We’re still confident that Tesla is working on this, and the continued delays on the release of an FSD update could point to the Cybertruck and a lack of data continuing to be a pain point for Tesla’s AI team. Cybertruck owners, including the author, have noted that FSD-equipped Cybertrucks continue to upload several hundred gigabytes or more of data per month. This topped out at nearly 1.9 TB of data uploaded in April 2025 for the author.
That’s a massive amount of data - and other users on social media have mentioned much the same for their own Cybertrucks. Tesla needs as much data as possible to tune the FSD models, and given the small fleet size for the Cybertruck, it requires a vast amount of data per user.
“Major Improvements”
While Elon didn’t mention what constitutes these major improvements, we have a lot of expectations besides what we know about the Cybertruck. Learning from the recent and successful FSD launch in China, Tesla is now able to utilize a more generalized model without specific local training data. This could potentially translate into better performance in North America as well, as the 7.7 million miles globally driven on FSD every day are feeding back into Tesla’s data loop.
We’re hopeful that future improvements continue to focus on improving tracking and decision-making, as well as lane handling. FSD users on X continue to point out issues with lane selection and lane keeping in the latest versions of FSD. On the flipside, Tesla has greatly increased the comfort and smoothness of FSD - and V13 is a prime example of that.
While V13.2.8 is also capable of pulling into parking stalls both forwards and in reverse (thanks to one of those flag changes recently), it does an oddly poor job of parking. Tesla’s Vision Autopark, on the other hand, is exceptionally accurate, even with big vehicles like the Cybertruck. It feels like Tesla is working on the parking lot stack to prepare for the upcoming launch of Robotaxi in June.
What About FSD V14
Back in the Q4 2024 Earnings Call, we heard about FSD V14, and just learned a little bit of what will make it unique. In this case, it's auto-regressive transformers that will improve FSD’s already powerful perception system and help it to predict better how other vehicles and road users will behave around it.
That, alongside a larger model and increased context size, will help FSD manage edge cases and make better decisions. The larger model and context size increases are likely another challenge for Tesla, which is already pushing the hardware limits of AI4 with FSD V13.
We did a deep dive into what we know about V14, which you can read here.
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