Tesla Model X Should Be Eligible For $25,000 Tax Deduction

In addition to state and federal tax credits, the Tesla Model X may be eligible for up to a $25,000 tax deduction known as the “Hummer Tax Loophole.”

It falls under IRS Section 179, but was given its nickname after many companies used it to deduct the purchase of large SUVs – gas-guzzling SUVs, and so assuming the Model X gets it, the turnabout could be seen as rich irony.

The provision allows business to write off certain costs, but there are a number of conditions. In general, the items must be purchased (gifts don’t qualify) and must be for business use.

Section 179 Deduction: Sport Utility and Certain Other Vehicles

You cannot elect to expense more than $25,000 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service during the tax year. This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight.

Source: IRS.gov


For passenger vehicles, the gross vehicle weight (GVWR) must be more than 6,000 pounds. Tesla hasn’t released this for the Model X, though the company did say it “expects the GVWR to exceed 6,000 pounds.”

SEE ALSO: What We Know About The Tesla Model X

At the Model X launch event last week, one attendee did share a snapshot of the door sticker on CEO Elon Musk’s Model X. The sticker states a GVWR of 6,768 pounds. As a Founder’s Edition with high-performance extras, Musk’s Model X will weigh somewhat more than a 90D version or smaller battery versions to follow. Even with a lighter rear motor and fewer accessories, it’s still likely that a base Model X will qualify for this deduction.

Tesla Model X

The door sticker of Model X VIN #001, owned by Tesla CEO Elon Musk. Photo via Twitter, posted by @kalud.

According to Fred Lambert with Electrek, the Model X is the first electric vehicle that has met the requirements for the Hummer tax loophole. Citing an online calculator and estimating a base price of $93,000, the “cash savings” on the purchase under IRS Section 179 assuming a 35-percent tax bracket works out to $13,510 meaning the reduced cost is $79,490.

This is before the $7,500 federal tax credit and short any state credit. For qualified buyers this means a 90-kwh Model X could net out for nearly the same or less than a base Model S 70D.

It’s not a bad prospect at all, but the massive federally supported effective discount is not guaranteed. Anyone thinking of taking advantage of it should also consult with a tax professional.

Assuming it passes muster, we’ll note when this law was written granting entitlement to V8s that get mpg in the teens and 20s, it’s likely no one foresaw a luxury electric vehicle getting upwards of 94 MPGe also benefitting.

Could that therefore make this a loophole within a loophole?