Colorado State EV Tax Credit Will Soon Soar to $5,000

Mar 29, 2023

Colorado will offer a big tax break for residents who buy electric cars and trucks. Coloradans might save even more by adding the federal EV tax credit.

Colorado now offers one of the highest state electric vehicle tax credits thanks to a new clean energy law. Colorado taxpayers can take advantage of this credit, which combined with the federal EV tax credit in 2023, can result in even greater savings.

The new law, "Tax Policy that Advances Decarbonization," which was recently signed by Colorado Gov. Jared Polis, aims to encourage the use of clean energy in part by providing several billion dollars in tax incentives. One is a $5,000 state tax credit for qualifying electric cars and up to $12,000 for eligible electric trucks. Colorado will also offer a statewide E-bike tax incentive, among other tax breaks.

"This is for Colorado to get a head start to help more people afford electric vehicles earlier and reduce the cost in Colorado," Polis told reporters when the law was proposed earlier this year.

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2023 Federal EV Tax Credit: New Rule Changes and What's Ahead

Colorado tax credit for electric trucks: The state tax credit is $12,000 for medium and heavy-duty electric trucks. That amount will apply through 2032.

Huge Potential Savings: If you're an eligible buyer looking to purchase a qualifying electric vehicle in Colorado, you can potentially benefit from stacking the state and federal EV tax credits. That means you could save up to $12,500 if you buy an electric car and up to nearly $20,000 if you purchase an electric truck that qualifies for both credits. (Keep in mind that income and price limits apply for the federal electric vehicle tax credit.)

Federal E-Bike Tax Credit Would Offer Up to $1,500

The higher Colorado state electric vehicle tax credit comes just as Tesla recently announced that all Model 3 versions qualify for the full $7,500 federal EV tax credit. The automaker also reduced the starting price of its Model 3 to $34,380, making it potentially more affordable.

The full fleet of electric vehicle models from GM, including the popular Chevy Bolt EV, are also eligible for the full federal tax credit.

Colorado's clean energy legislation also provides for an electric bike tax incentive. Beginning in April of 2024,

The Colorado electric vehicle tax credit can reduce your tax liability because, like other tax credits, it reduces your taxable income.

Federal EV Charger Tax Credit 2023: What You Need to Know

In addition, if you are a Colorado resident interested in saving more money, some Colorado utility companies offer up to $5,500 in rebates for electric vehicles and home charging stations. The federal tax credit for electric vehicle chargers, which expired a couple of years ago, is also back.

With more than 20 years of experience as a corporate attorney and business journalist, Kelley R. Taylor has contributed to numerous national print and digital magazines on key issues spanning education, law, health, finance, and tax. Over the years, Kelley has extensively covered major tax developments and changes including the TCJA, pandemic-era changes in ARPA, the SECURE 2.0 Act, and the numerous clean energy tax credits in the Inflation Reduction Act. Kelley particularly enjoys translating complex information in ways that help empower people in their daily lives and work.

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