Colorado has revamped its EV tax credit, with a new approach that incentivizes cheaper EVs.

HB 1272, which was passed by the Colorado legislature and signed by governor Jared Polis in May, re-ups a tax credit for light-duty electric vehicles that was originally $5,000. As originally enacted, it dropped to $4,000 in 2020, $3,500 in 2021, and $2,000 in 2023. But the new bill essentially resets the timeline, making the maximum amount once again $5,000 beginning July 1, for vehicles with an MSRP below $80,000, with a new phaseout scheduled that will see it decrease to $3,500 in 2025, $1,500 in 2026, $1,000 in 2027, and $500 in 2028.

As explained by Will Toor, executive director of the Colorado Energy Office, in a Twitter thread—and laid out clearly in the bill—Coloradans can also claim an additional $2,500 credit for vehicles with an MSRP under $35,000. According to Toor’s tweets, this addition was made to support EV adoption among low and moderate-income households, and encourage smaller EVs.

The $2,500 credit can be added to the $5,000 credit for a total of $7,500. And if the sub-$35,000 EV in question is also eligible for the $7,500 federal tax credit, buyers could receive credits worth almost half its purchase price. That’s effectively theoretical at the moment, however, given the small number of EVs available for less than $35,000.

Colorado has had one of the nation’s most generous EV credits for many years, even offering a credit for used cars at one time. In 2016 the state simplified its EV incentives, dropping out used cars and capping the new credit at $5,000.

2022 Mini Cooper SE2022 Mini Cooper SE

Colorado also moved toward California emissions standards in 2018, adding an EV mandate in 2019 (which was opposed by automakers at the time).

Not every state is upping its incentives. Oregon, for example, recently found that a funding crunch is effectively putting its state EV rebates on hold.

Regardless, the Colorado emphasis on smaller and cheaper vehicles is refreshing next to how, on the federal front, typically heavier and less-efficient SUVs are effectively incentivized with a larger potential credit.

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