Tesla Model X is the first electric car eligible to the $25,000 ‘Hummer Tax Loophole’

Last month we reported on the likely possibility of the Tesla Model X being eligible to $25,000 in tax deduction for business use under Section 179 of the tax code, also known as the ‘Hummer Tax Loophole’. The provision got its name for making Hummers very popular with businesses when it allowed for tax deductions of up to $500,000 for the purchase of heavy vehicles and equipment.

A vehicle requires a gross vehicle weight rating (GVWR) of over 6,000 lbs to be eligible for the tax deduction. Last month we didn’t have the official weight of the Model X nor its GVWR, which consists of the curb weight of the vehicle plus the weight of driver, passengers and cargo capacity, but excluding the weight of any trailer and towing capacity.

Today Tesla confirmed the curb weight of the Model X is 5,441 lbs and the company “expects the GVWR to exceed 6,000 lb” – making the Model X eligible to the tax deduction. Tesla CEO Elon Musk’s Model X P90D has a rated GVWR of 6768 lbs, well exceeding to required capacity. Since the deduction limit has been reduced to $25,000, the “loophole” is hardly a loophole anymore, but it is still more advantageous than regular depreciation in most situations. According to Crest Capital, the cost savings of the deduction on a $93,000 Tesla Model X (the expected price of the 90D) would be $13,510, bringing the cost to $79,490 before any EV incentives.

There’s currently an active lobbying effort in place to bring back the tax break limit of Section 179 to $500,000 as it was in 2014. If successful, it could make fleets of heavy vehicles popular again with U.S. businesses, but for the first time an electric vehicle would be eligible.

Of course we encourage anyone hoping to take advantage of the tax deduction to consult with their tax accountant before making any purchase as each individual’s tax situation may be different and Tesla “does not guarantee this deduction”.

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