Colorado EV Tax Credit 2023

Residents of Colorado are now privileged with some of the most lucrative state electric vehicle tax credits in the country, all thanks to a new law focusing on clean energy. Taxpayers in Colorado can now utilize this credit, which combined with the federal EV tax credit, promises substantial savings in 2023.

The recently enacted "Tax Policy that Advances Decarbonization" is a green initiative signed into law by Governor Jared Polis of Colorado. The goal is to encourage clean energy usage by offering billions of dollars in tax incentives, including a $5,000 state tax credit for qualifying electric vehicles and up to $12,000 for eligible electric trucks. Additionally, Colorado is set to provide a statewide E-bike tax incentive among other tax benefits.

Governor Polis highlighted that the objective of this law is to give Colorado the opportunity to lead in enabling more people to afford electric vehicles earlier, thereby reducing the cost of EVs in Colorado.

From July 1, the Colorado electric vehicle tax credit increases from $2,000 to $5,000 for vehicles with a manufacturer-suggested retail price (MSRP) under $80,000. Furthermore, starting in January 2024, an additional Colorado state EV tax credit of $2,500 becomes effective for electric vehicles with MSRPs under $35,000. However, beginning in 2025, the Colorado state electric vehicle tax credit will decrease each year through 2029, as stated in the legislation.

For electric trucks, the state tax credit in Colorado is $12,000 for medium and heavy-duty electric trucks. This amount will be applicable through 2032.

For eligible buyers planning to purchase a qualifying electric vehicle in Colorado, there are substantial savings to be made by combining both state and federal EV tax credits. You could save up to $12,500 on the purchase of an electric car and nearly $20,000 on an electric truck that qualifies for both credits. Please note that income and price limits apply for the federal electric vehicle tax credit.

The Colorado electric vehicle tax credit can lower your tax liability as it reduces your taxable income. This credit is available to Colorado taxpayers and can be applied to the tax return filed in the year following the EV's purchase.

So, if you purchase and start using your electric car or truck in 2023, you claim the tax credit on your 2023 tax return, typically filed early in 2024. The federal EV tax credit operates in a similar manner, although income limits apply to who can claim the credit, and price limits and other requirements determine the eligibility of certain electric vehicles for full, partial, or no tax credit.