EV Tax Credit 2025: What Colorado Drivers Need to Know

As the electric vehicle (EV) market continues to expand, federal and state tax credits have been a significant incentive for individual buyers. In 2025, new federal legislation called the One Big Beautiful Bill Act (OBBBA) will significantly change how EV tax credits work. If you plan to buy or lease an electric vehicle, understanding these updates could help you take full advantage of the available incentives and avoid missing out on potential savings.

Federal EV Tax Credits for 2025

• The federal tax credit for new electric vehicles remains up to $7,500 per vehicle. Eligibility depends on battery sourcing, North American assembly, MSRP caps ($80,000 for SUVs, trucks, and vans; $55,000 for other vehicles), and income limits ($300,000 for joint filers, $225,000 for heads of household, and $150,000 for single filers).
• For used EVs, the federal credit is up to $4,000, or 30 percent of the sale price, whichever is less. The vehicle must be priced at or below $25,000, and buyers must meet lower income thresholds.
• Credits can be transferred to a registered dealer at the point of sale for an immediate price reduction.
• All federal EV tax credits are nonrefundable and cannot be carried forward for personal use.

Key Change: Early Termination of Federal Credits

The One Big Beautiful Bill Act (OBBBA) will end all federal EV tax credits (new, used and commerical) for vehicles purchased after September 30, 2025. There is no phase-out or transition period. To qualify, buyers must complete the purchase or lease before that date.

Read more about OBBBA and its impact on tax legislation.

Colorado State Tax Credits

Colorado offers a refundable EV tax credit for new electric vehicles purchased or leased and titled in the state.

• Starting January 1, 2025, the standard credit is $2,500 for vehicles with an MSRP up to $80,000.
• An additional $2,500 is available for vehicles priced under $35,000, for a total possible credit of $5,000.
• The state EV tax credit is refundable and may be assigned to a dealer or financing entity at the point of sale for an immediate price reduction.
• This credit applies only to new vehicles, and leases must last at least two years.

Visit the Colorado Department of Revenue for complete EV tax credit details

Interplay Between Federal and State EV Credits

Until September 30, 2025, qualified buyers can combine the federal and Colorado EV tax credits, reducing the total cost of a qualifying vehicle by up to $12,500. After that date, only the Colorado state credit will remain available.

Action Items and Recommendations

• If you are considering buying or leasing an EV, act before September 30, 2025, to access both federal and state incentives.
• Confirm that the vehicle meets eligibility criteria such as MSRP, battery sourcing, and assembly requirements.
• Retain all required documentation and consult with a financial advisor to align your decision with your broader goals.

GHP Investment Advisors helps clients make informed, tax-efficient decisions, whether buying a vehicle or building a long-term financial plan. If you have questions about EV incentives or how they fit into your strategy, contact us.

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