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Does Colorado Have an EV Tax Credit?

Published on Jul 9, 2023 by Boulder Team

Colorado EV Tax Credit: What You Need To Know

When it comes to making the switch to electric vehicles (EVs), it's always helpful to understand the incentives available to you. If you're in Colorado, one question that might arise is "Does Colorado have an EV tax credit?" The answer is yes. The state of Colorado offers a refundable income tax credit for those purchasing or leasing a qualifying EV. Below, we'll provide an in-depth look at this credit and how it applies to your electric vehicle investment.

Innovative Motor Vehicle Credit: A Brief Overview

Colorado has an innovative policy that provides a refundable income tax credit for the purchase or lease of new electric and plug-in hybrid electric vehicles. This credit is granted for vehicles that are titled and registered within the state, provided they meet certain additional criteria. The credit amount varies per tax year.

 

As of January 1, 2024, not only can the buyer or lessee assign this credit to their financing entity, but also to the motor vehicle dealer. Please note, this article provides general guidance, and individuals should consult with their tax advisors for guidance specific to their circumstances.

Who Can Benefit from Colorado's EV Tax Credit?

The tax credit can be claimed by any taxpayer who purchases or leases a qualifying vehicle within the tax year. This applies to individuals, estates, trusts, and C corporations for each qualifying motor vehicle they buy or lease.

 

Partnerships or S corporations that purchase or lease a qualifying vehicle can also benefit, with the credit allowed for their partners or shareholders. As a new development for income tax years commencing on or after January 1, 2024, even tax-exempt entities and local governments in Colorado can claim this credit.

What Constitutes a Qualifying Motor Vehicle?

Not all vehicles qualify for this tax credit. The vehicle must be electric or a plug-in hybrid and must meet several conditions:

  • It must have four wheels
  • Its maximum speed must be at least 55 mph
  • Its gross vehicle weight rating (GVWR) should be 8,500 pounds or less
  • It should be propelled significantly by an electric motor
  • The vehicle's battery must be rechargeable from an external source and have a capacity of at least 4 kWh
  • The vehicle must be new at the time of purchase or lease
  • It must be titled and registered in Colorado
  • Light-duty passenger motor vehicles with a GVWR more than 8,500 pounds may qualify for the innovative truck credit instead.

The Importance of "New"

Only new motor vehicles are eligible for this tax credit. A vehicle is considered new only the first time it is transferred from the manufacturer, importer, dealer, or agent of the manufacturer or importer, to the end-user or customer.

 

Vehicles used by a dealer for demonstrations to prospective customers are considered new unless they have been used for more than 1,500 miles. A vehicle that has been titled or registered, either in Colorado or any other state or jurisdiction, prior to purchase or lease, is not deemed new.

 

In summary, if you're considering buying or leasing an electric or plug-in hybrid vehicle, Colorado's Innovative Motor Vehicle Credit offers a significant incentive. For more detailed information, consult the official guidance provided in the Colorado Individual Income Tax Guide and the Colorado Corporate Income Tax Guide, or discuss the matter with your tax advisor. Embrace the future of transportation with your new EV and enjoy the benefits of Colorado's EV tax credit.

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