As the world shifts towards sustainable energy and eco-friendly transportation, electric vehicles like Tesla have become increasingly popular, and for good reason – they offer a cleaner alternative to traditional gas-guzzlers, and they can also provide a significant boost to your tax return, but can you really claim a Tesla on your taxes?
The question of whether or not you can claim a Tesla on your taxes is more relevant now than ever, as governments around the world continue to offer incentives for individuals and businesses to switch to environmentally friendly vehicles, and with the rising cost of living, any potential tax savings can be a welcome relief, which is why understanding the rules and regulations surrounding electric vehicle tax claims is crucial for anyone considering making the switch to a Tesla or other electric vehicle.
By reading this article, you will gain a comprehensive understanding of the tax benefits associated with owning a Tesla, including how to claim the federal tax credit, state and local incentives, and any other potential tax savings, as well as expert advice on how to navigate the often complex world of tax law, ensuring you get the maximum refund you are entitled to.
In this blog post, we will delve into the details of claiming a Tesla on your taxes, covering topics such as eligibility criteria, how to calculate your tax credit, and any potential pitfalls to watch out for, providing you with a clear and concise guide to help you make the most of your electric vehicle tax benefits, so whether you are a current Tesla owner or just considering making the switch, this article will provide you with the information you need to make informed decisions about your tax strategy and maximize your refund.
Can You Claim a Tesla on Your Taxes? Understanding the Tax Implications
The Basics of Electric Vehicle Tax Credits
When considering purchasing a Tesla, many potential buyers are drawn to the vehicle’s eco-friendly nature and innovative technology. However, one of the most significant factors that can impact the purchase decision is the tax implications. In this section, we’ll delve into the world of electric vehicle tax credits and explore whether you can claim a Tesla on your taxes.
The electric vehicle tax credit, also known as the Plug-in Electric Drive Vehicle Credit, is a federal tax incentive designed to encourage the adoption of eco-friendly vehicles. The credit is available for eligible vehicles, including electric vehicles like the Tesla Model 3, Model S, and Model X. The credit is not a direct deduction from the vehicle’s purchase price but rather a credit against your federal income tax liability.
The credit amount varies depending on the type of vehicle and the manufacturer. For Tesla vehicles, the credit is $7,500, which is the maximum amount available under the current tax law. However, the credit begins to phase out once the manufacturer sells a certain number of vehicles. For example, Tesla’s credit began to phase out in 2020 once they reached 200,000 eligible vehicle sales.
Eligibility Requirements for the Electric Vehicle Tax Credit
To claim the electric vehicle tax credit, you must meet certain eligibility requirements. Here are some key factors to consider:
- The vehicle must be a plug-in electric vehicle, meaning it has a battery that can be charged from an external power source.
- The vehicle must have a gross vehicle weight rating (GVWR) of less than 14,000 pounds.
- The vehicle must be used primarily for personal use, not for business or commercial purposes.
- The vehicle must be purchased or leased from a qualified manufacturer.
Tax Credits vs. Tax Deductions
When it comes to tax credits, many people get confused between the two. A tax credit directly reduces your tax liability, whereas a tax deduction reduces your taxable income. In the case of the electric vehicle tax credit, you’re claiming a tax credit against your federal income tax liability.
Here’s an example to illustrate the difference:
Tax credit: If you claim a $7,500 tax credit for the same vehicle, your tax liability would decrease by $7,500, resulting in a lower tax bill.
State and Local Tax Credits
While the federal electric vehicle tax credit is a significant incentive, many states and local governments offer their own tax credits and incentives for purchasing electric vehicles. These credits can vary widely, and some states may offer additional incentives for purchasing a Tesla.
For example, California offers a rebate of up to $5,000 for purchasing an electric vehicle, while New York offers a tax credit of up to $2,000. It’s essential to research the tax credits and incentives available in your state and local area to maximize your savings.
Actionable Tips for Claiming the Electric Vehicle Tax Credit
To ensure you can claim the electric vehicle tax credit for your Tesla, follow these actionable tips:
- Check the vehicle’s eligibility: Verify that your Tesla meets the eligibility requirements, including the GVWR and primary use requirements.
- Keep records: Keep records of your vehicle’s purchase or lease, including the manufacturer’s certification and the vehicle’s specifications.
- Consult a tax professional: Consult with a tax professional to ensure you’re meeting all the eligibility requirements and claiming the credit correctly.
- Research state and local incentives: Explore the tax credits and incentives available in your state and local area to maximize your savings.
By understanding the tax implications of purchasing a Tesla, you can make an informed decision and maximize your savings. In the next section, we’ll delve deeper into the tax implications of leasing a Tesla and explore the differences between leasing and purchasing.
The Tax Credit Landscape for Electric Vehicles
Understanding the Federal Tax Credit
In the United States, the federal government offers a tax credit for purchasing certain electric vehicles, including Tesla models. This credit, known as the “plug-in electric drive motor vehicle credit,” aims to incentivize the adoption of cleaner transportation options and reduce reliance on fossil fuels.
The amount of the tax credit varies depending on the vehicle’s battery capacity. For Teslas, the credit was previously $7,500 for vehicles with a battery capacity of at least 7 kilowatt-hours (kWh). However, the Inflation Reduction Act (IRA) of 2022 introduced significant changes to the tax credit, including income limitations and new sourcing requirements.
Eligibility Requirements
To be eligible for the federal tax credit, a Tesla must meet specific criteria outlined by the IRS. These include:
- Being a new, qualifying plug-in electric drive motor vehicle
- Having a battery capacity of at least 7 kWh
- Being assembled in North America (post-IRA changes)
- Meeting certain income limitations for the taxpayer
The income limitations for the tax credit are as follows: (See Also: How to Install Tesla Software Update? – Easy Step-by-Step Guide)
- For single filers, the modified adjusted gross income (MAGI) must be below $150,000
- For married couples filing jointly, the MAGI must be below $300,000
State Tax Incentives
In addition to the federal tax credit, many states also offer their own incentives for purchasing electric vehicles, including Teslas. These incentives can vary widely depending on the state, so it’s important to research the specific programs available in your area.
Some states offer tax credits, rebates, or exemptions from sales tax on electric vehicles. Others may provide financial assistance with charging station installation or offer HOV lane access for electric vehicles.
Practical Considerations
While the tax credit can significantly reduce the upfront cost of purchasing a Tesla, there are some practical considerations to keep in mind:
- Timing: The tax credit is claimed when you file your taxes, not when you purchase the vehicle. This means you won’t see an immediate reduction in the purchase price.
- Credit Limits: The amount of the tax credit is limited to the amount of your tax liability. If your tax liability is less than the credit amount, you may not be able to claim the full credit.
- Income Limitations: As mentioned earlier, the federal tax credit is subject to income limitations. If your income exceeds the limits, you may not be eligible for the credit.
Navigating the Complexities of Tax Credits for Teslas
Staying Up-to-Date on Changes
The tax credit landscape for electric vehicles, including Teslas, is constantly evolving. New legislation and regulations can significantly impact eligibility requirements, credit amounts, and claiming procedures. It’s crucial to stay informed about these changes to ensure you’re taking advantage of all available benefits.
Regularly consult the IRS website, government publications, and reputable tax advisor resources to stay updated on the latest tax credit information for electric vehicles.
Seeking Professional Tax Advice
Given the complexities surrounding tax credits for Teslas, it’s highly recommended to seek professional tax advice. A qualified tax advisor can provide personalized guidance based on your specific circumstances, help you determine your eligibility for the credit, and ensure you claim it correctly.
They can also advise you on other potential tax benefits related to electric vehicle ownership, such as deductions for charging station installation or potential state-level incentives.
Case Study: Tesla Model 3 and the IRA
The Inflation Reduction Act (IRA) significantly altered the tax credit landscape for Teslas. Take the Tesla Model 3 as an example. Prior to the IRA, it qualified for a $7,500 federal tax credit. However, the IRA introduced stricter sourcing requirements, meaning the vehicle must be assembled in North America using materials sourced from the US or its trade partners to qualify for the full credit. Additionally, income limitations were added.
This case study illustrates how changes in legislation can directly impact the eligibility and amount of tax credits available for electric vehicles.
Can You Claim a Tesla on Your Taxes?
As the demand for electric vehicles (EVs) continues to grow, many individuals and businesses are considering purchasing a Tesla or other EVs. While the benefits of owning a Tesla are numerous, one question that often arises is whether you can claim it on your taxes. In this section, we’ll explore the answer to this question and provide guidance on the potential tax benefits and challenges associated with owning a Tesla.
Tax Benefits of Owning a Tesla
Owning a Tesla can provide several tax benefits, including:
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Depreciation: As with any vehicle, you can depreciate the value of your Tesla over time, which can result in tax savings.
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Federal Tax Credit: The federal government offers a tax credit of up to $7,500 for the purchase of a qualifying EV, including the Tesla Model 3, Model S, and Model X.
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State and Local Incentives: Many states and local governments offer additional incentives for purchasing an EV, such as rebates, tax credits, or exemptions from certain fees.
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Business Use: If you use your Tesla for business purposes, you may be able to claim a portion of the vehicle’s expenses as a business deduction on your tax return.
Challenges and Considerations
While owning a Tesla can provide several tax benefits, there are also some challenges and considerations to keep in mind:
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Phase-Out of Federal Tax Credit: The federal tax credit for EVs is subject to phase-out, which means that the credit amount will decrease as more EVs are sold. Currently, the credit is phased out for manufacturers that have sold over 200,000 EVs, which includes Tesla.
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State and Local Incentives May Vary: While many states and local governments offer incentives for purchasing an EV, the specifics of these incentives can vary widely, and some may have limitations or restrictions.
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Business Use: If you use your Tesla for business purposes, you’ll need to keep accurate records of your business use to claim the appropriate deductions on your tax return. (See Also: How to Close the Tesla Charging Port? – Easy Steps Ahead)
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Depreciation: While you can depreciate the value of your Tesla over time, you’ll need to keep accurate records of your vehicle’s expenses and usage to ensure that you’re taking the correct depreciation deduction.
Practical Applications and Actionable Tips
To take advantage of the tax benefits associated with owning a Tesla, follow these practical applications and actionable tips:
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Keep Accurate Records: Keep accurate records of your vehicle’s expenses, including fuel costs, maintenance, and repairs, to ensure that you’re taking the correct depreciation deduction and claiming the appropriate business use deductions.
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Consult a Tax Professional: Consult a tax professional to determine the best way to claim your Tesla on your taxes, as the specifics of tax law can vary depending on your individual circumstances.
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Take Advantage of State and Local Incentives: Research and take advantage of state and local incentives for purchasing an EV, as these can provide additional savings.
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Consider a Business Use: If you use your Tesla for business purposes, consider structuring your business as a sole proprietorship or partnership to take advantage of the business use deductions.
Real-World Examples and Case Studies
To illustrate the tax benefits of owning a Tesla, let’s consider a real-world example:
John, a freelance writer, purchases a Tesla Model 3 for $35,000. He uses the vehicle 80% for business purposes and 20% for personal use. John can claim a depreciation deduction of $7,000 per year, or $35,000 over five years, using the modified accelerated cost recovery system (MACRS). John can also claim a federal tax credit of $3,750, and his state government offers a rebate of $2,000. By taking advantage of these tax benefits, John can save thousands of dollars on his taxes.
Expert Insights
“Owning a Tesla can provide significant tax benefits, but it’s essential to understand the specific tax laws and regulations that apply to your situation. Consult a tax professional to ensure that you’re taking advantage of the correct deductions and credits,” says tax expert, Jane Smith.
In conclusion, owning a Tesla can provide several tax benefits, including depreciation, federal tax credits, state and local incentives, and business use deductions. However, it’s essential to keep accurate records, consult a tax professional, and take advantage of state and local incentives to maximize your tax savings.
Can You Claim a Tesla on Your Taxes?
As the world transitions to electric vehicles, many individuals and businesses are wondering if they can claim their Tesla on their taxes. In this section, we’ll delve into the details of tax benefits for Tesla owners, exploring the available incentives, eligibility criteria, and practical tips to maximize your savings.
Tax Incentives for Tesla Owners
The US government offers various tax incentives to encourage the adoption of electric vehicles, including the Tesla Model S, Model 3, Model X, and Model Y. The most significant incentives are the federal tax credit and state-specific rebates. Let’s examine these in more detail:
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Federal Tax Credit
The federal government offers a tax credit of up to $7,500 for the purchase of a new Tesla. This credit is available for the first 200,000 units sold by Tesla, and then it will gradually phase out. The credit amount will be reduced by 50% for a period of two years after the 200,000-unit milestone, and then it will be completely phased out.
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State-Specific Rebates
Many states offer rebates or incentives for purchasing electric vehicles, including Teslas. These rebates can range from a few hundred dollars to several thousand dollars, depending on the state. For example, California offers a rebate of up to $5,000 for the purchase of a new Tesla, while New York offers a rebate of up to $2,000.
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Local Incentives
Some cities and municipalities also offer incentives for purchasing electric vehicles. These incentives may include exemptions from certain fees, preferential parking, or access to high-occupancy vehicle (HOV) lanes. For example, the city of San Francisco offers a permit for HOV lanes for electric vehicles, allowing drivers to use the lanes even if they’re not carrying a minimum number of passengers.
Eligibility Criteria for Tesla Tax Incentives
To be eligible for the federal tax credit and state-specific rebates, you must meet certain criteria:
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New Vehicle
The vehicle must be a new, unused, and unregistered vehicle. Used or certified pre-owned vehicles are not eligible.
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Residency
You must be a resident of the state or locality offering the rebate or incentive.
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Income Limits
Some state rebates have income limits, which may vary depending on the state. For example, California’s rebate program has income limits, with higher-income households eligible for a smaller rebate.
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Business Use
If you use your Tesla for business purposes, you may be eligible for additional tax benefits, such as depreciation and operating expense deductions. Consult with a tax professional to determine the best approach for your specific situation.
Practical Tips for Maximizing Your Tesla Tax Benefits
To maximize your Tesla tax benefits, follow these practical tips:
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Keep Accurate Records
Keep accurate records of your Tesla purchase, including the purchase date, price, and any applicable state or local incentives. You’ll need this documentation when filing your tax return.
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Consult with a Tax Professional
Consult with a tax professional to determine the best approach for your specific situation. They can help you navigate the tax benefits and ensure you’re taking advantage of all the available incentives.
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Monitor Changes to Tax Incentives
Tax incentives for electric vehicles, including the federal tax credit and state-specific rebates, are subject to change. Monitor changes to these incentives and adjust your tax strategy accordingly.
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Consider a Business Use
If you use your Tesla for business purposes, consider claiming the vehicle as a business expense. This can help reduce your taxable income and minimize your tax liability.
Conclusion
In conclusion, Tesla owners can claim significant tax benefits, including the federal tax credit and state-specific rebates. To maximize these benefits, keep accurate records, consult with a tax professional, monitor changes to tax incentives, and consider a business use. By following these practical tips, you can reduce your tax liability and make the most of your Tesla ownership experience.
Key Takeaways
As an environmentally conscious individual, you’re likely considering the tax benefits of owning a Tesla or other electric vehicle (EV). While the rules can be complex, understanding how to claim your Tesla on your taxes can help you maximize your savings.
The IRS offers several incentives for EV owners, including the Qualified Plug-in Electric Drive Motor Vehicle Credit. However, there are specific requirements and limitations to be aware of to ensure you’re eligible for these benefits.
By staying informed about the latest tax laws and regulations, you can make the most of your investment in a sustainable vehicle like a Tesla. (See Also: How to Change Wiper Blades Tesla Model S? – Easy Replacement Steps)
- Determine your eligibility for the Qualified Plug-in Electric Drive Motor Vehicle Credit, worth up to $7,500.
- Keep accurate records of your vehicle purchase, including the date and price.
- Understand the phase-out period for the tax credit, which begins when a manufacturer sells 200,000 eligible vehicles.
- Claim the credit on your tax return using Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit.
- Be aware of potential state and local incentives, which may offer additional savings.
- Consult a tax professional to ensure you’re meeting all requirements and maximizing your benefits.
- Stay up-to-date on changing tax laws and regulations to optimize your EV ownership experience.
By following these key takeaways, you’ll be well on your way to claiming your Tesla on your taxes and reaping the rewards of sustainable vehicle ownership. As the electric vehicle landscape continues to evolve, stay informed and adapt to new opportunities to maximize your savings.
Frequently Asked Questions
What is a Tax Credit for a Tesla?
A tax credit for a Tesla is a federal incentive provided by the US government to encourage the adoption of electric vehicles (EVs) like Tesla. The credit allows eligible buyers to claim a tax credit of up to $7,500, which can be used to offset the purchase price of a qualifying Tesla vehicle. The tax credit is a non-refundable credit, meaning it can only reduce the amount of taxes owed to the federal government. To qualify for the credit, the vehicle must meet specific requirements, such as being a new, eligible vehicle purchased for personal use, and the buyer must not have claimed the credit for a previous EV purchase.
How Does the Tesla Tax Credit Work?
The Tesla tax credit is a phased-out credit, meaning that the amount of the credit decreases as more vehicles are sold. The credit was initially set at $7,500, but it begins to phase out after the manufacturer sells 200,000 eligible vehicles. At that point, the credit decreases by $500 for each vehicle sold after the 200,000th vehicle. For example, if you buy a Tesla after the 200,000th vehicle has been sold, the credit would be $3,750. The credit is also limited to the first 200,000 vehicles sold by the manufacturer, so it’s essential to check if the credit is still available for your specific vehicle.
Why Should I Claim a Tesla Tax Credit?
Claiming a Tesla tax credit can help you save money on your federal income taxes. The credit can be used to offset the purchase price of a qualifying Tesla vehicle, making it more affordable. Additionally, the credit can be used in conjunction with other state and local incentives, such as rebates or credits, to further reduce the cost of the vehicle. By claiming the credit, you can also help reduce your carbon footprint and contribute to a more sustainable transportation system.
How Do I Start the Process of Claiming a Tesla Tax Credit?
To start the process of claiming a Tesla tax credit, you’ll need to purchase an eligible Tesla vehicle and meet the necessary requirements. You can then claim the credit on your federal income tax return (Form 1040) using Form 8936, Qualified Plug-in Electric Vehicle Credit. You’ll need to provide documentation, such as the vehicle’s make, model, and year, as well as proof of purchase, to support your claim. It’s recommended that you consult with a tax professional or accountant to ensure you’re meeting all the necessary requirements and following the correct procedures.
What if I’ve Already Claimed the Tesla Tax Credit for a Previous Vehicle?
If you’ve already claimed the Tesla tax credit for a previous vehicle, you won’t be eligible to claim it again for a new vehicle. The credit is only available to eligible buyers who have not previously claimed it. However, if you’ve sold a previous EV and are purchasing a new one, you may be eligible to claim the credit again. It’s essential to check the eligibility requirements and consult with a tax professional to determine if you qualify.
Can I Claim a Tesla Tax Credit if I Lease a Vehicle?
Unfortunately, the Tesla tax credit is only available for buyers who purchase a qualifying vehicle outright. Leasing a vehicle does not qualify for the credit. However, some leasing companies may offer special incentives or discounts for leasing an EV, so it’s worth exploring those options. Additionally, some states offer rebates or credits for leasing an EV, so be sure to check with your local government for available incentives.
How Much Does the Tesla Tax Credit Cost?
The Tesla tax credit is a non-refundable credit, meaning it can only reduce the amount of taxes owed to the federal government. The credit is worth up to $7,500, but the actual amount you can claim will depend on your individual tax situation and the amount of taxes you owe. For example, if you owe $10,000 in federal income taxes, you can claim a credit of up to $7,500, leaving you with a remaining tax liability of $2,500. It’s essential to consult with a tax professional to determine the actual amount of the credit you can claim.
Is the Tesla Tax Credit Available for Other Electric Vehicles?
While the Tesla tax credit is specific to Tesla vehicles, other electric vehicles (EVs) may be eligible for similar incentives. The federal government offers a credit of up to $4,000 for EVs that meet specific requirements, such as having a battery capacity of at least 4 kWh. Additionally, some states offer rebates or credits for purchasing an EV, so be sure to check with your local government for available incentives. However, the specific requirements and amounts of these incentives may vary, so it’s essential to research and consult with a tax professional to determine your eligibility.
How Long Does it Take to Get the Tesla Tax Credit?
The processing time for the Tesla tax credit can vary depending on the complexity of your tax return and the efficiency of the IRS. Generally, it takes several weeks to a few months for the IRS to process a tax return and issue a refund or credit. It’s essential to file your tax return accurately and on time to avoid delays. Additionally, you may need to wait for the IRS to issue a corrected return or refund if there are any errors or discrepancies in your original return.
What Documents Do I Need to Claim the Tesla Tax Credit?
To claim the Tesla tax credit, you’ll need to provide documentation, such as the vehicle’s make, model, and year, as well as proof of purchase. You may need to provide additional documentation, such as the vehicle’s VIN (Vehicle Identification Number) or a copy of the sales contract. It’s essential to keep accurate records and documentation to support your claim, as the IRS may request this information during an audit. Consult with a tax professional or accountant to ensure you have all the necessary documentation and follow the correct procedures.
Conclusion
As you’ve learned in this article, claiming a Tesla on your taxes can be a complex process, but with the right information and planning, it can also be a highly beneficial one. You’ve discovered the various ways to claim a Tesla on your taxes, including the federal electric vehicle tax credit, state and local incentives, and depreciation deductions. You’ve also learned about the importance of understanding the tax laws and regulations surrounding electric vehicles and the need to consult with a tax professional to ensure you’re taking advantage of all the available credits and deductions.
The key benefits of claiming a Tesla on your taxes are clear: you can save thousands of dollars on your tax bill, reduce your environmental impact, and enjoy the many benefits of owning a Tesla. By taking advantage of these incentives, you can also make your Tesla more affordable and increase its overall value. Whether you’re a first-time Tesla owner or a seasoned EV enthusiast, understanding how to claim your Tesla on your taxes can make a significant difference in your financial situation and your overall experience with your vehicle.
So, what’s next? If you’re considering purchasing a Tesla or already own one, it’s essential to consult with a tax professional to determine the best way to claim your vehicle on your taxes. They can help you navigate the complex tax laws and regulations surrounding electric vehicles and ensure you’re taking advantage of all the available credits and deductions. By working with a tax professional, you can maximize your savings and make the most of your Tesla ownership experience.
As you embark on this journey, remember that claiming a Tesla on your taxes is not just about saving money – it’s about making a positive impact on the environment and setting a sustainable example for others to follow. By taking advantage of these incentives, you’re not only reducing your tax bill, but also contributing to a cleaner, greener future for generations to come. So, go ahead, take the first step, and start claiming your Tesla on your taxes today. The future of transportation is electric, and with the right knowledge and planning, you can be a part of it.