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There recently have been updates to Colorado’s electric vehicle (EV) tax incentives as they apply to light duty passenger vehicle purchases and leases. Different rules apply to light, medium, and heavy duty alternative fuel trucks as well as for conversions of traditional combustion vehicles to alternative fuel vehicles.
As many of our readers are likely aware, Colorado has the best EV tax incentive in the country. In addition to the federal tax incentive of up to $7,500, Colorado EV buyers can receive a tax incentive of up to $5,000 at the point of purchasing the vehicle, and $2,500 for leasing an EV. However, as of January 1, 2017, a few of the rules governing the size and availability of the tax credit have changed. The primary purpose of these changes is to simplify the process involved in receiving the credit.
One important aspect of the Colorado tax incentive that remains unchanged and which distinguishes it from the federal incentive is that the Colorado credit is refundable. This means that you can only benefit from the federal EV incentive if you have a high enough income for your tax liability to be at least as high as the incentive. In other words, if your EV purchase qualifies for the full $7,500 federal incentive, you can only benefit from this if you owe taxes and you can only receive the full benefit if you owe $7,500 or more in taxes. The Colorado EV tax incentive, by contrast, is set up so that the EV lessee or purchaser will receive cash back for the exact amount that the incentive exceeds what they owe in taxes.
The two most significant changes to the Colorado EV tax incentive effect the quantity and accessibility of the incentive. The new rules cap the incentive at $5,000 (compared to the previous $6,000) but greatly simplify the process of determining the size of the incentive for which your purchase or lease qualifies. Prior to January 1, 2017, the size of the incentive was a function of the size of the battery in the EV purchased or leased. The incentive has been simplified to a flat $5,000 refundable tax credit for all purchases and $2,500 for all leases (of a minimum of two years) of new alternative fuel vehicles.
The incentive rules have also now changed to exclude used EVs. The only exception to this rule change is vehicles converted from standard combustion engines to alternative fuel sources, but an entirely different incentive scheme applies to conversions.
If you’re worried about snagging this generous tax incentive before it expires, be aware that the current incentive structure will stay in place only until January 1, 2020 at which point the incentive will begin to be slowly phased out. On January 1, 2020 the incentive will be reduced to $4,000 for purchases and $2,000 for leases for one year, and then $2,500 for purchases and $1,500 for leases for an additional year before finally expiring altogether.
As Coloradans, we are fortunate to have this tax incentive in place until at least 2020, as there are many compelling EVs already on the market such as the Nissan LEAF and Chevy Volt, and many more to come in the next 2.5 years. To mention just a few: the first deliveries of the Tesla Model 3 are immanent, Honda will unveil a new pure EV this fall, and VW and Ford plan to launch several EVs by 2020. The first deliveries of the Chevy Bolt are occurring right now. We are also fortunate that these tax incentives are slated to remain in place for several more years allowing a forecasted increase in production to drive down price and offset the expiration of these incentives.
Let your friends and family know about these incentives, about the excellent EVs on the market right now, and about all of the advantages, personal, national, and global, to driving electric!
If you’d like to have a look at the original bill for these tax credits, you can find it here.