The passage of the Inflation Reduction Act and the availability of new enhanced Colorado EV credits have created an advantageous moment to buy an electric vehicle (EV). This is due to the increased balance between car dealers and buyers and the numerous programs that subsidize the purchase of EVs.
The Inflation Reduction Act offers a nonrefundable federal tax credit of $7,500 for qualifying electric cars. However, there are certain criteria that must be met, including the vehicle’s MSRP being below $55,000 for cars and $80,000 for SUVs and trucks. There are also requirements regarding critical minerals, battery components, and the country of assembly. In addition, income limits apply. However, there is a loophole for those who lease a vehicle, as they are exempt from these requirements and the tax credit goes to the lessor, resulting in lower leasing costs for the EV shopper.
Colorado has also introduced its own EV credit program, offering a state tax credit of $5,000 for qualifying vehicles with an MSRP under $80,000. This credit is refundable, meaning buyers can receive the full amount even if they pay little in Colorado tax. Starting next year, Colorado will further incentivize the purchase of more affordable EVs, increasing the credit by an additional $2,500 for vehicles with an MSRP under $35,000. Xcel Energy customers can also benefit from additional incentives for low to moderate income buyers and lessors of EVs.
For owners of vehicles over 12 years old or those that have failed an emissions test, there is the new Colorado vehicle exchange program. This program offers a discount of $6,000 for new vehicles and $4,000 for used EVs, applicable at authorized dealers for vehicles with an MSRP no higher than $50,000.
If you’re interested in purchasing an EV or plug-in hybrid electric vehicle (PHEV), leasing might be a viable option to avoid the requirements of the federal tax credit. Additionally, using the state credit of $5,000 towards the lease can be beneficial. When considering a lease, make sure to review the full lease sheet provided by the dealer, including the interest rate and purchase price. It’s important to confirm that the available credits are reducing the price of the vehicle and not solely benefiting the dealer.
Sources:
– The Inflation Reduction Act
– Colorado EV credit program
– Xcel Energy incentives
– Colorado vehicle exchange program