Search Federal and State Laws and Incentives

Low Emission Vehicle (LEV) Sales Tax Exemption

Vehicles, vehicle power sources, or parts used for converting a vehicle power source to reduce emissions are exempt from state sales and use tax. Exempt vehicles include vehicles certified to federal LEV standards that have a gross vehicle weight rating (GVWR) of over 26,000 pounds (lbs.). The exemption also applies if the GVWR is greater than 10,000 lbs. and if the vehicle, power source, or parts used for converting the power source meet the definition of a category 4, 4A, 4B, 4C, 7, or 7A truck, as defined in Colorado Revised Statutes 39-22-516.8. The vehicle power source includes the engine or motor and associated wiring, fuel lines, engine coolant system, fuel storage containers, and other components.

(Reference Colorado Revised Statutes 39-26-719)

Electric Vehicle (EV) Tax Credit

Qualified EVs titled and registered in Colorado are eligible for a tax credit. Light-duty EVs purchased or leased before January 1, 2026, are eligible for a tax credit equal to the amounts below, per calendar year:

The credit amount for any qualifying truck is limited to the difference in manufacturer’s suggested retail price between the qualifying truck and a comparable truck that operates on either gasoline or diesel fuel.

Eligible purchased vehicles must be new, and eligible leased vehicles must have a lease term of not less than two years. A purchaser may assign the tax credit generated through the purchase or lease to any of the above categories of vehicle to the financing entity, allowing the purchaser to realize the value of the tax credit at the time of purchase or lease. The financing entity may collect an administrative fee of no more than $150.

For more information, see the Colorado Department of Revenue’s Income 69 FYI publication.

(Reference Colorado Revised Statutes 39-22-516.5, 39-22-516.7, and 39-22-516.8)