Colorado Boosts EV Incentive To $5000, Adds $2500 Sweetener
Colorado is on a mission to get almost 1 million electric cars on its roads by 2030. Today, there are about 80,000 EVs in the state, so there’s a long way to go and a short time to get there. Sales are rising, however. This year, more than 10% of new vehicles sold in Colorado are EVs. The state already has a $2,000 tax credit for residents who purchase an electric car, but as of July 1, that will increase to $5,000.
The Colorado credit is on top of whatever federal tax credit the car may be eligible for. Right now, some electric cars are eligible for one half of the max federal tax credit, or $3,750. Others qualify for the full federal tax credit of $7,500. Whatever the federal rate is, Colorado adds $5,000 to it. As an example, the Tesla Model Y standard range today lists for $47,490. It is eligible for the full federal tax credit. Add in the new Colorado incentive and the net cost of that car is $34,990. That’s pretty good, considering the Model Y is now the best selling car in the world.
Naturally, there are some requirements in order to be eligible. First, you have to pay taxes in Colorado before you can qualify for the tax credit. That should be intuitively obvious to the most casual observer, but you never know these days. Second, the MSRP of the vehicle cannot exceed $80,000.
That’s it. There’s nothing more to know. There is a sweetener in the latest Colorado tax incentive package for EVs, however. Beginning January 1, 2024, if the MSRP of the car is less than $35,000, the total amount of the state tax credit bumps up to $7,500. If that same car also qualifies for the full federal tax credit, the buyer gets a total of $15,000 in savings, which would get the price of that car below $20,000. Now we are not saying there is a huge selection of EVs that list for less than $35,000 and qualify for the full federal tax incentive, but if you can find one, the savings will be there for the taking.
The new tax credit runs from July 1, 2023, until January 1, 2025, at which time it begins to phase out through the end of 2029, so those who act first will get the biggest benefit.
Targeted Tax Incentives
There are some people who think the current system of tax credits and rebates is not structured in such a way as to give taxpayers the most bang for their bucks. Why give someone who drives 2,500 miles a year the same incentive as someone who drives 25,000 miles a year? Taxpayers would get bigger rewards in terms of reduced emissions if they focused those subsidies on drivers who pack on big miles every year.
There are others who prefer a version of the Cash For Clunkers program the federal government ran back in 2009. It was designed to get the biggest polluters off the road. The kicker was that people had to trade in an old gas hog to qualify for the purchase incentive on a new vehicle. Why not do the same thing with electric cars? If you want government assistance, turn loose of your old gasmobile as part of the deal.
According to Colorado Public Radio, the state is considering just such a plan, although final details have not been finalized. If it gets approved, beginning this summer the “Vehicle Exchange Colorado” program give participants an instant $6,000 point of sale rebate on a new electric or plug-in hybrid vehicle, and a $4,000 rebate for a used electric or plug-in hybrid vehicle. “It’s a really exciting new program,” said Carrie Atiyeh, senior program manager at the Colorado Energy Office. “This is something that is going to be new for the state.”
To qualify, drivers would need to trade in a conventional car with an internal combustion engine that burns either gasoline or diesel. The vehicle needs to be a model year 2011 or older, or have failed a state vehicle emissions test. It also must have been owned by the person trading it in for at least a year.
The program will be restricted to low- and moderate-income Colorado residents. The state is proposing to limit participation to households that are enrolled in other income qualified programs or that earn less than 80 percent of the area median income. That would amount to an annual income of $62,500 for a one person household or $103,750 for a family of four in Denver. The cap will change from locality to locality and is based on calculations from the federal Department of Housing and Urban Development.
But Wait, There’s More
The new instant rebate can be “stacked” with other state level incentives, such as income qualified rebates of up to $5,500 offered by utility companies like Xcel Energy and Black Hills Energy for up to a $11,500 discount. Or a consumer could stack the voucher with the new $5,000 tax credit available to any resident regardless of income.
Some buyers will also be able to stack the state incentives with a federal credit of up to $7,500, depending on their individual tax circumstances. “We are working on those program details,” Atiyeh said. “There are a lot of incentives out there.”
Generally speaking, Colorado is quite friendly in terms of tax policy toward EV owners. It also offers up to $1,000 in tax credits for EV charging equipment, and at least $300 to anyone who buys an e-bike too. That incentive is due to increase to $450 next spring, when it will become a point of sale discount at all bicycle retailers in the state. That plan runs through 2032.
Heat Pump Incentives
Under new legislation passed recently, Colorado residents are now eligible for a one-time $1,500 tax credit for an air source heat pump installed from 2024 until 2026. After that, it drops to $1,000 until 2029, then again to $500 at the end of 2032. In the case of a ground source heat pump, a resident is eligible for a $3,000 tax credit from 2024 until 2026. After that, it drops to $2,000 until 2029, then again to $1,000 at the end of 2032. There is also a $500 tax credit from 2024 until 2026 that applies to heat pump water heaters. After 2026, it drops $250 until the end of 2032.
The Takeaway
Colorado is one of the leading US states when it comes to offering incentives for the purchase of low- or zero-emissions cars, e-bikes, and heat pumps. If only it offered ocean-front property, it would be the ideal place for environmentally conscious Americans to reside.
Featured photo: A Ford F-150 Lightning courtesy of Ford.
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