Great news for drivers looking to purchase an electric vehicle in Colorado! 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 Colorado Electric Vehicle 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, starting January 1, 2024, new electric vehicles priced under $35,000 MSRP will be eligible for an additional $2,500 state tax credit.
What Are Electric Vehicle Incentives?
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.
Changes to Colorado’s Electric Vehicle Tax Credit
New Colorado tax credit at a glance
- July 1, 2023: Colorado EV tax credit increases from $2,000 to $5,000 for vehicles under $80,000 MSRP. This includes best-selling popular EVs like Tesla Model Y, Tesla Model 3, Ford Mustang Mach-E, Volkswagen ID.4, and more.
- January 1, 2024: Vehicles priced under $35,000 MSRP, like the Chevrolet Bolt EV and Bolt EUV, Chevrolet Equinox EV, Hyundai Kona Electric, Nissan Leaf, and more, qualify for an additional $2,500 tax credit.
With the upcoming changes being put in place by the new law, Colorado will have the highest state EV tax credit in the country. That’s fantastic news for Colorado drivers looking to make the switch to an electric vehicle.
Colorado Electric Vehicle Tax Credit Qualifications
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.
Is the Colorado Electric Vehicle Tax Credit Refundable?
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 $5,000 Colorado EV tax credit, the state will refund any remaining balance of the credit to tax payers as an additional cash refund.
Xcel EV Energy Rebate
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.
Buying a Qualifying Electric Vehicle in Colorado
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 All-Wheel Drive, recently named the most popular motor vehicle in the world.
The Tesla Model Y All-Wheel Drive has a current purchase price of $47,740, 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, a federal credit of $7,500, and an Xcel energy rebate of $5,500 toward the purchase of a Tesla Model Y, lowering the price to $29,740. That’s a savings of $18,000!
Apply Your State and Federal EV Tax Credits Immediately with EV Life
Unlike gas vehicles, many EVs come with tax credits, rebates, and other incentives that can total up to $18,000 on the purchase of a new EV in Colorado. The US Inflation Reduction Act of 2022 introduced billions in new funding for a federal EV tax credit of up to $7,500 on the purchase of eligible vehicles through 2032. Starting July 1, the State of Colorado will increase the Colorado EV Tax Credit from $2,000 to $5,000. Additionally, income-qualified Coloradans can also get a $5500 EV rebate from Xcel Energy.
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. However, if you choose to finance your electric vehicle or PHEV, traditional auto lenders won’t consider those incentives when you apply for your loan.
To get your incentives, you must apply for each EV program separately from your auto loan, then wait an average of 6-18 months while your application is processed before you receive them. The solution? EV Life’s EV Climate Loan.
With the EV Climate Loan, you can pre-qualify for all your incentives, then use the money as an incremental down payment on your auto loan, lowering your monthly payments by an average of $200/month.
Take Advantage of EV Tax Credits Before They Expire
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.Get pre-qualified today to find out how much you can save on your new EV.