Understanding the Colorado Tax Credit for Electric Vehicles

July 25th, 2023 by
ID4 EV tax credits available for sale or lease at Emich Volkswagen in Denver

ID4 EV tax credits available for sale or lease at Emich Volkswagen in Denver

The New Colorado Innovative Motor Vehicle Credit has increased to $5,000

Colorado is really pushing car buyers into the Electric Vehicle space when they raised the tax credit from $2,000 to $5,000 on any new purchases after July 1, 2023. And the new credit is also raised for leases from $1,500 to $5,000. Coupled with the Federal Tax Credits available for the ID.4 new Volkswagen buyers could save as much as $12,500 on a lease or purchase. But understanding the details of these credits is important. So we want to help you understand in the simplest way, How much does anyone actually qualify for? And which vehicles can you get the credits on?

EV Tax Credits Simplified:

Federal Credit – A tax credit of $7,500 is available for businesses and individuals who have purchased a new EV after April 18, 2023. This credit has a few requirements:

For the vehicle, the construction of the battery must meet new critical mineral and battery component requirements, and the manufacturing must be done in North America, among other details—all of which the Volkswagen ID.4 is one of the few vehicles to fully meet and qualifies for the full potential $7,500.
For the buyer, you must buy it for your own use, not for resale and use it primarily in the U.S and your income must not exceed the following:

  • $300,000 for married couples filing jointly
  • $225,000 for heads of households
  • $150,000 for all other filers

For vehicles and purchasers meeting these requirements you will receive a tax credit on your 2023 filing that will be capped by your tax liability.

For anyone who leases a vehicle that meets the mentioned vehicle requirements, Volkswagen as a manufacturer is passing along the entire tax credit as a direct discount on the value of the vehicle at the time of the lease.

Colorado Innovative Motor Vehicle Credit – A tax rebate of $5,000 is available for anyone who pays Colorado taxes and purchases or leases an Electric Vehicle with an MSRP under $80,000 as of July 1, 2023. So, when you file your 2023 taxes, you will receive a full credit of $5,000 regardless of how much taxes you pay.

The difference between a credit and a rebate – Just because the value of the Federal Credit is a maximum of $7,500 does not mean that you will receive that much. The Federal Tax Credits are limited by your tax liability, which means if you only pay $4,500 in federal taxes you will only receive a $4,500 credit bringing your taxes owed to $0. However the Colorado State Credit is a rebate which means if you pay $4,500 in taxes to Colorado, with the $5,000 credit you would receive a check of $500 as a rebate after you file.

The difference between a purchase and a lease – While both credits are available for the full amounts whether you purchase or lease an Electric Vehicle, there are important details that separate the two. Namely, when you lease an Electric Vehicle, Volkswagen as the manufacturer agrees to pass along the full credit of $7,500 as a discount on the vehicle price. Which means you receive the full incentive right away at the time of the lease, rather than waiting for the end of the year when you file your taxes. For the purchase of a vehicle, you will receive the available qualifying credit after you file your taxes.
For the Colorado Tax Credits, whether you are purchasing or leasing, you will receive these after you file your taxes—they do not apply to the purchase price of the vehicle.


Other incentives

While the Volkswagen ID.4 is one of the few vehicles that qualifies for the full value of both credits there are other opportunities to save:

Free Charging: Volkswagen has partnered with Electrify America to provide 3 years of unlimited 30 minute sessions of charging (60 minute breaks are required in between each 30 minute session).
Infrastructure Rebates: If you are adding a charging station to your home there are Federal Credits and rebates from Xcel Energy (for their customers) available on installation.
Xcel Energy: Xcel provides a potential rebate for up to $5,500 for uniquely qualified EV buyers who are also Xcel Energy customers.

For more details on any of these rebates please give us a call, we will be happy to explain any details and see which discounts you qualify for on the Volkswagen ID.4 here in Denver.