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The bill has officially been passed. This is said to be the best EV tax incentive and I think it's great ! Definitely will push more people to hop aboard and buy an EV I think

Coloradoans, you might want to take another look at an electric car. The state has officially passed a bill – HB 1332 – that modifies the state tax credits associated with "alternative fuel motor vehicles" to bring the state credit to parity with the EV paradise that is California.

The old system called on some obscure formula for determining the size of a tax credit when purchasing an EV, but the new system replaces that with a simple flat tax for a "light-duty" EV. Eligible buyers can snag a $5,000 incentive, which can be paired with the $7,500 federal tax credit, slashing $12,500 off a consumer's taxes. That'd mean a very big refund come April for anyone who qualifies.

So yes, Colorado is like California. But in an important way, it's better. According to the Southwest Energy Efficiency Project, Colorado's state tax credit can be assigned to a dealership or finance company. Consumers sign over the tax credit to the proper party at the time of purchase, effectively surrendering it in exchange for the dealer slashing $5,000 off the purchase price. In other words, the tax credit becomes an incentive and is available when you buy the car.

According to SWEEP, the new law is the "best EV tax incentive in the nation" and should lead to a big increase EV sales in the Centennial State. We suspect this will be the case, because who doesn't like a $5,000 discount?
 

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Nice. We had a $5K tax incentive here in Georgia until last year - then the Republicans happened... Since then, BEV sales have tanked here. I agree you can't keep the incentive forever, but it should have been gradually phased out after a number of years or when a certain vehicle count was reached.
 

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This kind of a good news - bad news bill depending on your circumstances. Since it takes effect Jan 1, 2017 there is still time to take advantage of the old incentive.

It reduces the maximum tax credit from $6,000 (lease or purchase) to a flat rate $5,000 for a purchase or $2,500 for a lease (available as a tax credit but can be assigned tot he seller/finance company). The old formula was: Cost incurred by the purchaser * Battery kWh/100 with a $6K max.

So if you (could) lease a Bolt before 2017, you would get 60% of the lease cost (with a cap of $6K) in the form of a tax credit. If you lease after 2016, you get a flat $2500 (but could be taken off the lease price).

If you (could) purchase in 2016, you'd get $6K in the form of a tax credit. After 2016 you'd get $5K, but it can be taken off the purchase price instead of waiting to file your taxes (or adjusting your withholding to compensate). The fee to transfer the credit to the seller/finance company is capped at $150.

The other thing to note is that they have removed the credit on used vehicles that have never been registered in CO. You currently can bring one in from out of state and claim the credit. A used Leaf will get you a 24% credit (for a 24 kWh model), once again capped at $6K.

I think it unlikely that Colorado will be one of the first markets to get the Bolt, so 2016 sales/leases will be unlikely unless you buy in California and ship it in.

The new amounts do phase out starting in 2020.
 

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This kind of a good news - bad news bill depending on your circumstances. Since it takes effect Jan 1, 2017 there is still time to take advantage of the old incentive.

It reduces the maximum tax credit from $6,000 (lease or purchase) to a flat rate $5,000 for a purchase or $2,500 for a lease (available as a tax credit but can be assigned tot he seller/finance company). The old formula was: Cost incurred by the purchaser * Battery kWh/100 with a $6K max.

So if you (could) lease a Bolt before 2017, you would get 60% of the lease cost (with a cap of $6K) in the form of a tax credit. If you lease after 2016, you get a flat $2500 (but could be taken off the lease price).

If you (could) purchase in 2016, you'd get $6K in the form of a tax credit. After 2016 you'd get $5K, but it can be taken off the purchase price instead of waiting to file your taxes (or adjusting your withholding to compensate). The fee to transfer the credit to the seller/finance company is capped at $150.

The other thing to note is that they have removed the credit on used vehicles that have never been registered in CO. You currently can bring one in from out of state and claim the credit. A used Leaf will get you a 24% credit (for a 24 kWh model), once again capped at $6K.

I think it unlikely that Colorado will be one of the first markets to get the Bolt, so 2016 sales/leases will be unlikely unless you buy in California and ship it in.

The new amounts do phase out starting in 2020.
Ohh I see how this could be a pro/con. Wasn't sure exactly how it worked, but thank you for explaining that. I'm in Canada so it doesn't really affect me but it's great that you cleared that up just in case is applies to others here !
 

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It's good if you couldn't get the maximum $6,000 tax credit. At least you'll be guaranteed that $5k but if you do qualify for the full 6k, you'd be getting 1k less than what you could have gotten.

Too bad a lot of people in Colorado won't be able to take advantage of it before 2017.
 

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The credit equation used to be this: (purchase price or sum of lease payments X battery capacity in kWh) ÷ 100 = State credit amount

Good for some but some may lose out on that $1k.

Here's a chart of of the old credits before the $5k.

 

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Please note that the $5K only applies to a purchase. If you lease you get $2500.

One side effect of removing the tie to battery size is that PHEV's with a small battery have the same incentive as a long range BEV. A Fusion Energi with 0-19 miles of electric range (can't run the EPA electric range test without firing the ICE) will get the same incentive as a Bolt with over 200 miles of range.
 

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Please note that the $5K only applies to a purchase. If you lease you get $2500.
Thanks for highlighting this. I think it's a key point to mention because EV residual values still seem to be free-falling, so it's much smarter in my opinion to lease EVs at this point in time so that you can take advantage of fixed depreciation. And if you're only looking at leasing, the $5k is not in play, only $2500.
 

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And the incentive is applied pre-tax ?
Lease:
Colorado collects tax on the total lease payments, so yes, it would be pre-tax since both the Federal and State (if you assign it to the leasing company for $150) would be cap reductions and lower your lease payments. The tax will either be collected up front as part of the drive off cost or added to your lease payment. How it is handled depends on both the term of the lease and the dealership and/or finance company you are dealing with. There are also local taxes that will be added to the lease or the lease payments depending on the location where you live and where the dealership is located.

Purchase:
I believe you will pay tax on the full purchase price and the transferred tax credit will be treated as if you wrote a check for a down payment or part of the purchase price.

How are trade-ins taxed?

Many dealerships allow you to trade-in your old car in exchange for a credit applied to the price of a new vehicle. For example, you could trade-in your old car and receive a $5,000 credit against the price of a $10,000 new vehicle, making your out-of-pocket cost only $5,000.

In Colorado, the taxable price of your new vehicle will be considered to be $5,000, as the value of your trade-in is not subject to sales tax. This means that you save the sales taxes you would otherwise have paid on the $5,000 value of your trade-in.

How are rebates and dealer incentives taxed?

Many dealers offer cash incentives or manufacturer rebates on the sticker price of a vehicle in order to encourage sales. For example, a $1,000 cash rebate may be offered on a $10,000 car, meaning that the out of pocket cost to the buyer is $9,000.

Colorado taxes vehicle purchases before rebates or incentives are applied to the price, which means that the buyer in this scenario will pay taxes on the vehicle as if it cost the full $10,000.


While they allow trade-ins to reduce your taxable amount (you paid tax on the trade-in when you purchased or registered it), rebates and incentives are a different story.
 

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You're probably even better than the financial consultants at dealerships. So if people want a lower tax, they'll first have to reduce the car price somehow before rebates and incentives.

Doesn't help people who doesn't have a car to trade in first. I'm guessing something similar applies to the other states?
 
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