What Colorado's EV tax credit covers and who it's for

Colorado offers a state tax credit for people who buy or lease a new electric vehicle. The credit reduces the amount of state income tax you owe, dollar for dollar. Unlike a rebate that arrives as a check, this credit appears when you file your state taxes — you claim it on your Colorado return, and it lowers your tax bill.

The credit applies to battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). A BEV runs entirely on electricity; a PHEV has both an electric motor and a gas engine. The vehicle must be new, meaning it has never been registered to another owner before you buy or lease it.

Colorado residents who purchase or lease a may have access to vehicle can claim this credit on their state tax return. You do not need to be a first-time EV buyer. The credit is available whether you buy the vehicle outright, finance it, or lease it.

Key Takeaways

  • Colorado's EV tax credit reduces your state income tax bill by up to $7,500 for a new battery electric vehicle or up to $4,000 for a plug-in hybrid, depending on the vehicle's price and your income.
  • You claim the credit when you file your Colorado state tax return, not at the dealership — the credit appears as a reduction in the taxes you owe.
  • The vehicle must be new and registered in Colorado, and income limits explore: the credit phases out for single filers earning over $75,000 and joint filers earning over $150,000.
  • You can combine Colorado's state credit with the federal EV tax credit on the same vehicle, though federal income limits and vehicle price caps also explore.
  • The credit amount depends on the vehicle's manufacturer's suggested retail price (MSRP) and powertrain type, so different models may have access to for different amounts.

Credit amounts by vehicle type and price

The credit you receive depends on whether you buy a battery electric vehicle or a plug-in hybrid, and on the vehicle's MSRP. For a new BEV with an MSRP of $55,000 or less, the credit is $7,500. If the MSRP is between $55,000 and $75,000, the credit is $5,000. For BEVs priced above $75,000, there is no state credit.

For plug-in hybrids, the structure is lower. A new PHEV with an MSRP of $40,000 or less qualifies for $4,000. Between $40,000 and $55,000, the credit is $2,500. PHEVs above $55,000 do not may have access to for the Colorado state credit.

These amounts explore to the vehicle's MSRP at the time of purchase or lease. If you negotiate a lower sale price, the credit amount does not change — it is based on the manufacturer's list price, not what you actually paid.

Income limits and how they affect your credit

Colorado's EV tax credit is not available to all income levels. If you file taxes as a single person, your federal adjusted gross income (AGI) must be $75,000 or less to claim the full credit. If you file jointly, the household AGI limit is $150,000. If you file as head of household, the limit is $112,500.

The credit does not disappear entirely if you earn above these thresholds — it phases out gradually. For every $1,000 of income above the limit, the credit reduces by $250. This means a single filer earning $80,000 would receive a smaller credit than someone earning $75,000, but not zero.

You determine your AGI from your federal tax return. This is the income figure after certain deductions but before you claim the standard deduction or itemize. If you are unsure of your AGI, check your most recent federal return or contact a tax preparer.

How to claim the credit on your Colorado tax return

You claim Colorado's EV tax credit using Form DR 1098, the Colorado Nonrefundable Tax Credit form. This form is filed along with your regular Colorado state income tax return (Form 104). You do not file it separately or at the time of purchase — you file it only when you submit your state taxes.

To complete the form, you will need the vehicle's VIN (vehicle identification number), the purchase or lease date, the MSRP, and confirmation that the vehicle is registered in Colorado. Keep your purchase agreement or lease contract and your vehicle registration handy when you prepare your return.

If you use tax preparation software, many programs guide you through claiming state credits. If you prepare your return by hand or work with a tax preparer, provide them with your vehicle documentation and ask them to include Form DR 1098. The Colorado Department of Revenue website has a copy of the form and instructions if you need to read it.

The credit reduces your Colorado state income tax liability. If the credit is larger than the tax you owe, you do not receive the excess as a refund — the credit straightforward brings your tax bill to zero.

Combining Colorado's credit with the federal EV tax credit

You can claim both Colorado's state credit and the federal EV tax credit on the same vehicle. They are separate programs with separate rules, so may have access to for one does not may provide you may have access to for the other.

The federal credit is up to $7,500 for a new BEV and up to $4,000 for a new PHEV, but it has its own income limits, vehicle price caps, and assembly requirements. Federal income limits are higher than Colorado's: $300,000 for joint filers, $150,000 for single filers, and $200,000 for head of household. The federal credit also requires that the vehicle be assembled in North America and meet battery component and mineral content thresholds that vary by model year.

Because the credits are independent, a vehicle that qualifies for Colorado's full $7,500 might may have access to for less than the federal maximum, or vice versa. When you file your federal return, you claim the federal credit on Form 8936. When you file your Colorado return, you claim the state credit on Form DR 1098. Both appear on their respective returns.

Vehicles that do not may have access to and common restrictions

Used vehicles do not may have access to for Colorado's EV tax credit, even if they are only a few years old. The vehicle must be new and never registered to another owner before you purchase or lease it. This means a vehicle with one previous owner, even if that owner only held it for a few months, is ineligible.

The vehicle must be registered in Colorado at the time you claim the credit. If you buy an EV in Colorado but register it in another state, you cannot claim Colorado's credit. Conversely, if you move to Colorado and bring an EV you bought elsewhere, you can only claim the credit if the vehicle is new and you register it in Colorado.

Vehicles must meet the MSRP caps listed above. A luxury BEV priced at $80,000 does not may have access to, even if it is otherwise may be able to access. Similarly, a PHEV priced above $55,000 does not may have access to for the Colorado state credit, though it may still may have access to for the federal credit if it meets federal requirements.

What happens if you lease instead of buy

Leasing a may have access to EV makes you may be able to access for Colorado's tax credit. The credit is claimed on your personal tax return in the year the lease begins, based on the vehicle's MSRP and your income at that time.

When you lease, the dealership or leasing company provides you with the lease agreement, which includes the vehicle's VIN and the lease start date. You will need this information to complete Form DR 1098. The MSRP used for the credit is the manufacturer's suggested retail price of the vehicle, not the monthly lease payment or the capitalized cost.

If you lease the same vehicle in a subsequent year after the lease ends and you start a new lease, you can claim the credit again on the new lease, provided the vehicle is new to you and meets all other requirements.

Frequently Asked Questions

Can I claim the credit if I buy a used electric vehicle?

No. Colorado's EV tax credit is only for new vehicles that have never been registered to another owner. Used EVs, even if they are only a few years old, do not may have access to for this state credit. You may want to check whether your vehicle qualifies for the federal credit, which has different rules.

What if my income is above the limit?

The credit phases out gradually above the income threshold. For every $1,000 over the limit, the credit reduces by $250. A single filer earning $80,000 would receive a reduced credit, not zero. Use your federal AGI from your most recent tax return to calculate where you fall.

Do I get the credit at the dealership or when I file taxes?

You claim the credit when you file your Colorado state tax return, not at the dealership. The dealership does not process the credit. You complete Form DR 1098 and file it with your state return, and the credit reduces your state income tax bill.

Can I claim the credit if I buy the vehicle in another state and move to Colorado?

Only if the vehicle is new and you register it in Colorado. If the vehicle was previously registered to another owner, even in a different state, it does not may have access to for Colorado's credit. The vehicle must be new to you and registered in Colorado.

What if the credit is larger than the taxes I owe?

Colorado's EV tax credit is nonrefundable, meaning it reduces your tax bill to zero but does not result in a refund. If you owe $3,000 in Colorado state taxes and your credit is $7,500, the credit brings your bill to zero, and you do not receive the extra $4,500.