Colorado will soon become the state with the most generous EV tax credits in the US, offering electric vehicle buyers a $5,000 credit that can be stacked with up to $7,500 in federal incentives.
The Colorado legislature passed several bills earlier this month that are designed to help accelerate the adoption of cleaner transportation, complementing the Inflation Reduction Act and American Recovery Act to incentivize consumers to buy new electric vehicles and home appliances.
Governor Jared Polis signed HB23-1272, Tax Policy That Advances Decarbonization, which not only increases and extends the state EV tax credit for passenger cars, but also for electric medium and heavy-duty trucks. The bill also sets up a new statewide point-of-sale incentive for e-bikes and expands tax credits for in-home heat pumps.
Starting July 1, 2023, the Colorado EV tax credit increases from a current $2,000 to $5,000 for vehicles with a starting MSRP up to $80,000. This is a significant rise that translates into total potential tax credits (state plus federal) of $12,500, assuming the consumer qualifies for both.
But wait, it gets even more interesting. Beginning January 1, 2024, the new bill also establishes an additional tax credit of $2,500 for EVs with an MSRP under $35,000. This means that Colorado residents who buy an EV that costs under $35K will get both the $5,000 state EV tax credit and the $2,500 additional incentive – on top of the $7,500 federal tax credit.
Under this best-case scenario, Colorado residents could get a total of $15,000 in state and federal incentives by stacking all three tax credits. This means that Tesla's rumored $25,000 compact car would effectively cost eligible Colorado residents just $10,000!
The Colorado state EV tax credit steps down annually through 2029. It's worth noting that Colorado's EV tax credit used to be $5,000 but was reduced to $2,000 in 2021.
Moving on to electric trucks, the bill increases the state tax credit to $12,000 for medium and heavy-duty (MHDV) electric trucks through 2032. This is designed to help fleets in Colorado comply with the recently adopted Advanced Clean Truck and Low NOX rules. The tax credits can be layered with federal tax credit for maximum savings up to $40,000 per truck.
Finally, the bill establishes a new statewide incentive of $450 for e-bikes beginning April 2024. The credit is taken at point-of-sale, which means the customer experiences it as a direct discount when paying for the bike.