What You Need to Know about the Colorado Electric Vehicle Tax Credit

Discover the ins and outs of Colorado's Electric Vehicle Tax Credit. Aimed at residents of Colorado, this guide provides a comprehensive overview of the state's Innovative Motor Vehicle Credit program. Learn about the purpose and eligibility criteria. Explore the types of entities eligible for the credit and the specific requirements for qualifying vehicles. Whether you're considering going electric or simply curious about Colorado's green initiatives, here is additional information on how it could benefit your taxes. 
Purpose and Eligibility:

• Colorado offers a refundable income tax credit for the purchase or lease (min. 2 year lease) of qualifying motor vehicles.
• Available for new electric and plug-in hybrid electric motor vehicles titled and registered in Colorado.

Eligible Entities:

• Individuals, estates, trusts, C corporations, partnerships, and S corporations.
• Tax-exempt entities and local governments in Colorado (for income tax years from January 1, 2024).

Qualifying Motor Vehicles:

• Four-wheeled electric or plug-in hybrid vehicles with a maximum speed of 55 mph.
• Gross vehicle weight rating (GVWR) of 8,500 pounds or less.
• Propelled significantly by an electric motor.
• Rechargeable battery with a capacity of at least 4 kWh.
• Must be new (first time transferred from manufacturer, importer / dealer with less than 1,500 miles), titled, and registered in Colorado.

Titling and Registration:

• Credits only apply to vehicles titled and registered in Colorado.
• Temporary registration permits are insufficient to satisfy the registration requirement.

Credit Amounts:

• For tax year 2023 (purchases or leases after July 1, 2023) and 2024, the credit is $5,000. For 2025 the credit is reduced to $3,500. 
• No credit for vehicles purchased or leased after June 30, 2023, with an MSRP over $80,000.
• Additional credit of $2,500 for vehicles with an MSRP under $35,000 and an option for advanced payment.
• Additional credit of $600 for assigning the entire allowable credit to a financial entity or motor vehicle dealer.

Credit Assignment:

• Purchasers or lessees can assign credits to financing entities or motor vehicle dealers.
• Compensation for credit assignment must be made in cash or similar considerations.
• The motor vehicle purchaser or lessee and the financing entity must complete and sign an election statement (form DR 0618) to assign the credit. The election statement must be completed at the time of the purchase or lease.

Claiming the Credit:

• Claimed on the Colorado income tax return for the tax year in which the purchase or lease occurred on form DR 0617.
• Excess credit may be refunded if it exceeds the taxpayer's tax liability for the year.

Estimated Tax Payments:

• Taxpayers can consider the credit in calculating estimated payments for the tax year.

Navigating the electric vehicle tax credit involves understanding filing procedures and changes effective from 2024. Whether claiming the credit on your tax return or transferring it to the dealer, staying informed ensures a smooth process. As always, consult with us for personalized guidance based on your unique circumstances.

*Note: The information provided is based on the latest details as of 02/05/2024. Tax laws are subject to change, and it's essential to stay informed about any updates.