The federal tax credit
The federal tax credit on EV purchases is subject to a number of variables. Yes, you could get the maximum $7,500, but only if you check all the boxes.
First, the potential credit depends on the manufacturer. The 2010 legislation that enacted federal EV tax credits states that after a manufacturer sells its first 200,000 EVs the credit gets cut in half, and then tapers to zero over the following year. Thus Teslas and Chevy Bolts no longer qualify for any tax credit.
The credit on a Nissan Leaf is still $7,500 for the time being, but it will probably go down to $3,750 sometime in 2020, so that’s a good reason to move on a purchase soon. The other qualifying models featured in our Sales EVent – the Audi e-tron, Kia Niro and Honda Clarity – all remain at $7,500. (Note: Honda’s CRV Hybrid doesn’t qualify for any credit because you can’t plug it in.)
In the case of leased vehicles, the tax credit goes to the leasing company. Still, that should enable the dealer to offer a correspondingly lower monthly payment.
Second, the tax credit is less for certain models with smaller batteries – for example, many plug-in hybrids. (That doesn't apply to any of the vehicles in this EV Sales EVent.)
Third – and very importantly – the amount of federal tax credit you get will depend on your federal income tax liability for 2020. You can claim a credit for no more than the amount of tax you owe, and the credit can be used only for the tax year in which the purchase is made.
Example 1: Jane Doe buys an EV that qualifies for a $7,500 credit. Her federal tax owed for the year of purchase (including employer withholdings and self-employment pre-payments) is $5,000. Jane will receive a $5,000 refund.
Example 2: Mary Buck buys an EV that qualifies for a $7,500 credit. Her federal tax owed for the year of purchase (including employer withholdings and self-employment pre-payments) is $20,000. Jane will receive a $7,500 refund.
Colorado's tax credit
Colorado's 2020 "Innovative Motor Vehicle" income tax credit is a flat $4,000 for the purchase of any plug-in hybrid or all-electric vehicle, and $2,000 for the lease of any plug-in hybrid or all-electric vehicle. (Those numbers go down to $2,500/$1,500 in 2021 – another reason to buy now.)
One of the great things about the state credit is that it's fully refundable. That means you get the full credit no matter what your state tax bill is. If you owe $1,000 in state income tax, say, and you leased an EV, you'll instead get a $1,000 refund; and if you purchased an EV, you'll get $3,000 back.
The other great thing about the state credit is it's assignable. In 2016, legislators passed HB 1332, which allows vehicle buyers to assign the "Innovative Motor Vehicle" income tax credit to a financing entity at the time a new electric vehicle is leased, or purchased using financing.
Ask your dealer if its financing entity has signed up with the Colorado Department of Revenue. If it has, and if you chose to lease the vehicle or purchase with dealer financing, the dealer can offer the tax credit at the time of sale. Buyers don't have to wait to file their taxes the following year to benefit from the state tax credit.
Banks or credit unions providing auto loans can also offer the assigned tax credit, if they have signed up with the Colorado Department of Revenue.
The dealership's financing entity, bank or credit union will ask the buyer or lessee to sign a Colorado Department of Revenue “Election Statement” form, DR 618, to document the transaction at the time of purchase.
The financing entity may collect a fee of up to $150 from the buyer's tax credit to cover its administrative costs for processing the assignment.
Get free, unbiased advice on EVs
Thinking about buying an electric vehicle? Watch our recorded Experience Electric Road Show webinar, viewable on Youtube.
Learn about special discounts that local dealers are offering, and hear from an avid Tesla driver about the myths and realities of EV ownership. Lots of info and insights about charging, sales trends, environmental implications, new technology, cost of ownership, driving in snow and more!
Holy Cross Energy offers rebate for a Level 2 home charger
- Holy Cross is offering its customers a ChargePoint Home Level 2 EV charger (up to two chargers if you have two EVs).
- You hire the electrician to install the charger.
- You can either pay your electrician for the installation, or have HCE cover your upfront costs and spread it over 3 years on your electric bill.
- You have 60 days to install and activate your charger from the date you pick up the charger.
Go Green with Alpine Bank
Make your drive time greener by purchasing a more fuel-efficient vehicle. Choose any of the EV Sales Event discount vehicles and Alpine Bank will take 1/2 percent off your loan interest when you qualify for a loan. More details here.