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Electric cars will soon be cheaper in Colorado thanks to a $5,000 incentive

Electric vehicles are suddenly looking sweeter in Colorado. With only one dissenting vote, the Colorado Legislature approved HB 1332, which includes a $5,000 point of sale incentive for new, light-duty electric cars, according to the Southwest Energy Efficiency Project.

This legislation replaces the previous, somewhat complicated formula with a new, flat state tax credit of $5,000. When the new incentive goes into effect on January 1, 2017, Colorado will have the highest electric vehicle incentive in the nation. But it gets better.

In a unique twist,  a new electric car buyer in Colorado can assign the tax credit at the time of sale directly to the car dealer or to a finance company. You don’t have to do that, and not everyone will, depending on their resources and tax plans, but Colorado officials want more people to buy electric cars. The legislature passed the law assuming that many buyers would take the immediate benefit. The tax credit assignment is the same as handing over $5,000 directly to the dealer or finance company, so you don’t have to wait for a credit when you do your taxes the following year.

Related: Germany announces $1.1 billion in subsidies for electric cars

The federal incentive program for all-electric and plug-in hybrid vehicles is a tax credit that maxes out at $7,500 depending on the capacity of the battery used to power the vehicle. All-electric cars get the full $7,500 credit, but as usual with tax credits, you won’t see it in your pocket at the point of sale and will need to wait till you file your taxes and possibly not until you receive a refund. The federal incentive program begins a phase-out period after a manufacturer sells a total of 200,000 vehicles. A full table of hybrid and all-electric vehicles currently eligible for the federal tax incentive and the allowable amount is included here.

So as of January 1, 2017 — and the wait is the only slight bummer of the new law — Colorado electric car buyers can take up to $12,500 off the list price of a new electric car — $5,000 assignable immediately to the dealer or finance company or as a state tax credit and $7,500 in federal tax credits.