Colorado Electric Vehicle tax credit
CEO Policy & Research Team : Samantha Reifer
- It’s Quicker and Easier for Consumers
The former tax credit calculations were unnecessarily complex for the everyday consumer, creating an additional barrier for individuals when purchasing an alternative fuel vehicle. Requiring car buyers to know various items such as federal tax liability and battery size (in the case of plug-in electric vehicles) in order to calculate their unique tax return was convoluted, on par with solving a Rubix Cube. This extra step often required car shoppers to leave the sales lot to consult with a tax advisor before making a purchase. To simplify the process, HB16-1332 set fixed flat tax credit values for each vehicle class size regardless of fuel type, eliminating calculations and guesswork.
...and most of us want our refund today, right? Not next year. Consumers now will be able to assign the tax credit to participating vehicle financing companies so that the lending entity deals with the difficult paperwork. This means that car shoppers are rewarded immediately and don’t need to wait until they file taxes the following year.
Colorado already has the highest incentives for alternative fuel vehicles in the country. Now it is easier for those benefits to be realized instantly.
- It Applies to ALL Alternative Fuel Vehicles
First and foremost, these tax credits are NOT only reserved for electric vehicles. It applies to all alternative fuel vehicles, classified in the bill as vehicles powered by natural gas, propane, hydrogen, and electricity.
As CNG and propane powered vehicles gain traction in corporate fleets, it is important to maintain tax credits that aren’t favoring one technology over another in the world of transportation.
Aside: If you want to learn more about how fleets can incorporate CNG, propane, and electric vehicles into transportation strategy, check out the review of the City of Aurora’s transition to an alternative fuel vehicle fleet, found here.
Urban planners rejoice! This piece of legislation covers all vehicle sizes from passenger cars to semi-trucks. Meaning that each fuel type and vehicle class is treated equitably.
It is to be noted that the discounts are slightly variant due to the higher prices of larger vehicles. Below are the tax credits by vehicle type from January 1, 2017-January 1, 2020:
Light Duty Passenger Motor Vehicle
This makes the process fair by forcing the same discount to be applied to any alternative fuel vehicle to establish an equal advantage for all makes and models.
PLUS, this assignable incentive also is applied toward leased vehicles. Typically the incentive for a leased vehicle is half that of a purchased vehicle. For example, leased lightweight passenger vehicles receive an incentive of $2, 500.
- How it Works
The key new players utilized in this bill are lenders, or vehicle financing entities. They provide the $5, 000 rebate to consumers up front, in exchange for ownership of the tax credit for which they later will be compensated for by the government. In other words, this new bill essentially grants the buyer the right to assign the tax credit to a willing lender in exchange for the instant reduction in price on their vehicle. This is optional, however. Consumers are still in the driver’s seat as they can choose to keep the rights to the credit and be refunded on tax day.
For consumers, the change also means that it possible for auto financing plans to apply the tax credit discount to the purchase, essentially reducing the amount financed and the amount of interest paid throughout the financing period. This makes the vehicles more affordable to consumers who initially were priced out.
For electric vehicles, the state tax credits are in addition to the $7, 500 offered in federal tax credits, totaling a maximum of $12, 500 per vehicle for passenger vehicles.
- Should You Wait Until 2017 to Buy?
Colorado always has been a leader in creating and promoting incentives for the citizens the state serves. Are you interested in purchasing an electric vehicle now? The state offers up to $6, 000 tax credit incentives for EVs.