Alternative Fuel, Advanced Vehicle, and Idle Reduction Technology Tax Credit

The Colorado Department of Revenue offers the Innovative Motor Vehicle Credit for a vehicle titled and registered in Colorado that uses or is converted to use an alternative fuel, is a hybrid electric vehicle (HEV), is a plug-in hybrid electric vehicle (PHEV), or has its power source replaced with one that uses an alternative fuel. Electric vehicles (EVs) and PHEVs must have a maximum speed of at least 55 miles per hour. Qualified idle reduction technologies are also eligible for the tax credit. Credits for vehicles purchased or converted January 1, 2012, through December 31, 2021, are based on defined vehicle and technology categories as listed below. Credit amounts vary for each category and tax year with percentages applying to incremental cost for alternative fuel vehicle (AFV) purchases and power source replacements and actual cost for conversions and idle reduction technologies.

1 - Original equipment manufacturer (OEM) light-duty EV or PHEVSee belowSee belowSee belowSee belowSee below
1A - Conversion of a light-duty motor vehicle to a EV or PHEV75%75%56.25%37.5%18.75%
2 - Light-duty diesel-electric hybrid passenger vehicle with a minimum fuel economy of 70 miles per gallon (mpg)25%15%11.25%7.5%3.75%
3 - Light-duty passenger vehicle, light-duty truck, or medium-duty diesel-electric truck conversion that increases original fuel economy by at least 40%35%25%18.75%12.5%6.52%
4 - Dedicated or bi-fuel OEM light-duty passenger vehicle, light-duty truck, or medium-duty truck powered by compressed natural gas (CNG) or liquefied petroleum gas (LPG or propane)10.5%12.25% (2014-2016); 10.5% (2016-2018)7.875%5.25%2.625%
4A - Dedicated or bi-fuel light-duty passenger vehicle, light-duty truck, or medium-duty truck converted to use CNG or propane35%25%18.75%12.5%6.25%
5 - Idle reduction technologies25%25%18.75%12.5%6.25%

Credits for EVs and PHEVs in Category 1 are equal to the actual cost incurred to purchase or lease the vehicle, multiplied by the battery capacity, and divided by 100. That amount must be multiplied by a factor to determine the credit amount, as follows: 1.0 for 2013-2018, 0.75 for 2019, 0.50 for 2020, and 0.25 for 2021.

The credit is capped at $6,000 for the following: OEM or converted AFVs, HEVs, PHEVs, idle reduction technologies, and power source replacements. The credit for PHEV conversions is capped at $7,500 until January 1, 2014, and $6,000 thereafter. A person who claimed a tax credit in previous years for the purchase or lease of Model Year 2004 and newer HEV may claim an additional credit for the conversion of the same vehicle to a PHEV. The purchase of a used vehicle may qualify if the vehicle was not previously registered in Colorado. Credits may not be carried forward and a taxpayer will receive a refund for the excess credit.

Credits for CNG, electric, and plug-in hybrid electric vehicles purchased, leased, or converted during the 2013 tax year may be determined in one of two different ways. For more information, see the Department of Revenue's Income 67 FYI publication.

(Reference House Bill 13-1247, 2013 and Colorado Revised Statutes 39-22-516.5 and 39-22-516.7)

Point of Contact

Kurt Bloomer
Tax Examiner III
Colorado Department of Revenue
Phone: (303) 205-8211 x6871
Fax: (303) 866-3050

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