Colorado’s electric vehicle tax credit is now worth $5,000

Gov. Jared Polis approved the expanded tax credit by signing HB23-1272. Along with funding to nudge electric car adoption, the law includes a suite of new incentives for heat pumps and e-bikes to help shift the state away from fossil fuels and towards its climate goals.

By offering a more generous credit, the state hopes to build on Colorado’s recent momentum of increased electric vehicle sales. Recent data from the Colorado Automobile Dealer Association show that 10.5 percent of all cars sold in the state were electric, a three-fold increase from just three years earlier.

One factor that’s driven the rise in sales is the federal $7,500 rebate on electric vehicles. The Inflation Reduction Act, signed by President Biden in 2022, renewed the credit with new restrictions to encourage carmakers to use domestic supply chains to build cars and batteries. That means many electric vehicles no longer qualify.

In March, Gov. Polis said he was concerned it could take years for carmakers to shift their operations in response. The state’s expanded credit is designed to ensure Colorado consumers don’t lose interest in the meantime.

Additional rebates could soon be available for low-income residents. In August, the state will launch a program to offer a $6,000 discount on the purchase of a new electric vehicle or $4,000 off a used vehicle — if buyers give up an older or high-emission model. Applicants must meet one of a number of income qualifications to be eligible.