1/12/2024
Learn about the new increases to Colorado Electric Vehicle Tax Credit that can save drivers $5,000 on the purchase of an eligible electric vehicle.
Peter Glenn
Great news for drivers looking to purchase an electric vehicle in Colorado! As of January 1, 2024, the Colorado EV Tax Credit increased from $5,000 to $7,500.
On May 11, 2023, Colorado Governor Jared Polis signed House Bill 23-1272 into law. The bill puts forth several measures aimed at advancing decarbonization in the state, including tax credits for industrial facilities to implement emission-reducing improvements, new spending for geothermal energy projects and geothermal electricity generation, the construction of sustainable aviation fuel production facilities, and more.
But the most exciting part of the new bill for many Colorado residents is the expansion of an additional tax credit for qualified drivers looking to purchase electric vehicles. From July 1, 2023, onwards, all Colorado residents who purchase an electric or plug-in hybrid electric vehicle (PHEV) with an MSRP of up to $80,000 qualify for an EV tax credit of $5,000. According to the Colorado Energy Office, the state tax credit will be in place until January 1, 2025, at which point the EV tax credit amount will begin to drop incrementally until 2029.
In addition, as of January 1, 2024, new electric vehicles priced under $35,000 MSRP are now eligible for an additional $2,500 state tax credit.
Electric vehicle incentives are programs designed to promote the adoption of electric vehicles. Incentives are typically created and provided by state and federal governments, though some are also offered by utility companies and other organizations. These incentives were introduced to promote the transition towards cleaner transportation in order to reduce smog and greenhouse gas emissions and slow the effects of climate change.
The most common types of incentives include tax credits, rebates, and grants, though other perks, like fee reductions, sales tax exemptions, special carpool lane privileges, and free parking, also exist. Which EV incentives are available to income-qualified residents depends on where you live and whether your electric vehicle meets the eligibility requirements set forth by the program.
With these new changes being, Colorado now has the highest state EV incentive in the country. That’s fantastic news for Colorado drivers looking to make the switch to an electric vehicle.
When combined with the $7,500 federal tax credit introduced by the Inflation Reduction Act of 2022, Colorado drivers could receive a tax credit as high as $12,500 on a qualifying EV.
Note: both the Colorado tax credit and the federal tax credit have household income restrictions that must be met to qualify for the full amount.
The increased $5,000 Colorado tax credit applies to all EVs and PHEVs with an MSRP under $80,000. Many of the vehicles that qualify for the Colorado tax credit also qualify for the federal tax credit. Despite additional battery component restrictions that were added to the federal EV tax credit, 81% of electric vehicles sold in 2023 still qualify, and all of those EVs are on the list of eligible vehicles for the Colorado credit.
For an example of how much you could save on your EV, let’s say you are a Colorado driver shopping for electric cars, and you decide on the Tesla Model Y, recently named the most popular motor vehicle in the world.
The Tesla Model Y has a current purchase price of $43,990, which meets the MSRP requirements of both federal and state credits. That means qualified drivers can receive a Colorado EV tax credit of $5,000 and a federal credit of $7,500 toward the purchase of a Tesla Model Y, lowering the price to $31,490. That’s a savings of $12,500!
Yes, according to the Colorado Energy Office’s EV website, the Colorado Department of Revenue’s FYI Income 69 states:The credit is refundable; to the extent that the amount of the credit exceeds tax, the excess credit is refunded to the taxpayer.
So if you do not have enough Colorado state tax to use the up to $7,500 Colorado EV tax credit, the state will refund any remaining balance of the credit to taxpayers as an additional cash refund.
In addition to the state tax credit and federal tax credit, Colorado residents can also take advantage of the rebate programs offered by Xcel Energy. A premier energy products and services company based in Minneapolis and operating throughout the Midwest, Xcel Energy provides an income-qualified electric vehicle rebate of up to $5,500 for drivers that purchase or lease a new EV from a Colorado-based electric car dealer.
Eligible applicants must meet certain income requirements and have an electric service account with Xcel Energy in Colorado. Residents who are enrolled in programs like LEAP, CARE, SNAP, or TANF automatically qualify.
Note: As of February 7, 2024, the Xcel Energy Rebate cannot be combined with the Colorado EV Tax Credit.
Colorado’s new Vehicle Exchange Colorado (VXC) program helps income-qualified Coloradans recycle and replace their old or high-emitting vehicles with electric vehicles (EVs). The VXC rebate will partially cover the upfront cost of the EV at the time of purchase or lease from an authorized automobile dealer.
Eligible trade in vehicles are 12 years or older.
With trade in, applicants get an additional rebate of:
In addition to the Colorado tax credit and the federal tax credit, there are also a variety of other rebates, grants, and incentives that can help you save money on your purchase, depending on your eligibility.
Try EV Life’s Savings Calculator to see what you qualify for.
At EV Life, we’re on a mission to make it easier and more affordable for anyone to save on driving electric–including you!
With a free EV Life account we help you:
Open a free account today and start saving on your EV.
If you’re a Colorado driver looking to save big and make the switch to an electric vehicle or PHEV, now is the time to do it. The Colorado tax credit will be in place until January 1, 2025, at which time it will begin to decrease incrementally until it disappears in 2029. That means the best time to buy an electric vehicle is now, and the best way to make the most of your EV incentives is by financing your purchase through EV Life.
Open a free account today and start saving on your EV.
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