HB 24-1311

HB 24-1311, known as the Family Affordability Tax Credit, provides tax relief for Colorado families with children under 17 by offering a refundable credit. For each child aged 5 or younger, families can receive up to $3,200 (adjusted for inflation), and for older children, they get 75% of that amount. However, the credit decreases as income increases and is tied to state revenue growth rates. The bill was signed into law and will take effect on August 7, 2024, meaning families can start claiming this tax credit when filing taxes starting in 2024 for the 2023 tax year.

Official Summary

For income tax years commencing on and after January 1, 2024, but before January 1, 2034, the act creates a refundable, means-tested family affordability tax credit (credit) as follows: A taxpayer who files a single return is allowed a credit for each eligible child of the taxpayer who is 5 years of age or younger in a base amount of $3,200, adjusted for inflation and subject to reductions based on the taxpayer's income level and state economic conditions, and is allowed a credit for each eligible child of the taxpayer who is 6 years of age or older but less than 17 years of age in an amount that is 75% of the amount allowed for children 5 years of age or younger as adjusted and subject to reductions; and Two taxpayers who file a joint return are allowed a credit for each eligible child of the taxpayers who is 5 years of age or younger in a base amount of $3,200, adjusted for inflation and subject to reductions based on the taxpayers' income level and state economic conditions, and are allowed a credit for each eligible child of the taxpayers who is 6 years of age or older but less than 17 years of age in an amount that is 75% of the amount allowed for children 5 years of age or younger as adjusted and subject to reductions. For income tax years commencing on and after January 1, 2024, but before January 1, 2025, the act reduces the $3,200 amount of the credit for a taxpayer filing a single return by 6.875% for each $5000 by which the taxpayer's adjusted gross income exceeds $15,000, and reduces the $3,200 amount of the credit for two taxpayers filing a joint return by 6.875% for each $5,000 by which the taxpayers' adjusted gross income exceeds $25,000. For income tax years commencing on and after January 1, 2025, but before January 1, 2026, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the 2025-2026 fiscal year is projected to be at a rate that is greater than or equal to 2%, then, for a taxpayer filing a single return, the act reduces the $3,200 amount of the credit by 6.875% for each $5,000 by which the taxpayer's adjusted gross income exceeds $15,000, and, for two taxpayers filing a joint return, reduces the $3,200 amount of the credit by 6.875% for each $5,000 by which the taxpayers' adjusted gross income exceeds $25,000. If, for income tax years commencing on and after January 1, 2025, but before January 1, 2026, the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the 2025-2026 fiscal year is projected to be at a rate that is less than 2%, the credit is not allowed. For income tax years commencing on and after January 1, 2026, but before January 1, 2034, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the applicable fiscal year is projected to be at a rate that is greater than or equal to 3.75%, then, for a taxpayer filing a single return, the act reduces the $3,200 amount of the credit by 6.875% for each $5,000 by which the taxpayer's adjusted gross income exceeds $15,000, and, for two taxpayers filing a joint return, reduces the $3,200 amount of the credit by 6.875% for each $5,000 by which the taxpayers' adjusted gross income exceeds $25,000. For income tax years commencing on and after January 1, 2026, but before January 1, 2034, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the applicable fiscal year is projected to be at a rate that is greater than or equal to 3.56% but less than 3.75%, then, for a taxpayer filing a single return, the act reduces the $3,200 amount of the credit by 9.06% for each $5,000 by which the taxpayer's adjusted gross income exceeds $15,000, and, for two taxpayers filing a joint return, reduces the $3,200 amount of the credit by 9.06% for 2 taxpayers filing a joint return for each $5,000 by which the taxpayers' adjusted gross income exceeds $25,000. For income tax years commencing on and after January 1, 2026, but before January 1, 2034, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the applicable fiscal year is projected to be at a rate that is greater than or equal to 3.37% but less than 3.56%, then, for a taxpayer filing a single return, the act reduces the $3,200 amount of the credit by 13.59% for each $5,000 by which the taxpayer's adjusted gross income exceeds $15,000, and, for 2 taxpayers filing a joint return, reduces the $3,200 amount of the credit by 13.59% for each $5,000 by which the taxpayers' adjusted gross income exceeds $25,000. For income tax years commencing on and after January 1, 2026, but before January 1, 2034, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the applicable fiscal year is projected to be at a rate that is greater than or equal to 3.18% but less than 3.37%, then the act reduces the amount of the credit to $2,600, adjusted for inflation, and, for a taxpayer filing a single return, reduces that amount by 19.23% for each $5,000 by which the taxpayer's adjusted gross income exceeds $15,000, and, for 2 taxpayers filing a joint return, reduces the $2,600 amount by 19.23% for each $5,000 by which the taxpayers' adjusted gross income exceeds $25,000. For income tax years commencing on and after January 1, 2026, but before January 1, 2034, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the applicable fiscal year is projected to be at a rate that is greater than or equal to 3% but less than 3.18%, then the act reduces the amount of the credit to $1,650, adjusted for inflation, and, for a taxpayer filing a single return, reduces that amount by 30.30% for each $5,000 by which the taxpayer's adjusted gross income exceeds $15,000, and, for 2 taxpayers filing a joint return, reduces the $1,650 amount by 30.30% for each $5,000 by which the taxpayers' adjusted gross income exceeds $25,000. For income tax years commencing on or after January 1, 2025, the department of revenue is required to adjust the federal adjusted gross income amounts set forth in the act to reflect inflation for each income tax year in which the credit is allowed if cumulative inflation since the last adjustment, when applied to the current limits, results in an increase of at least one thousand dollars when the adjusted limits are rounded to the nearest $1,000. For income tax years commencing on and after January 1, 2026, but before January 1, 2034, if the compound annual growth of the state's nonexempt revenue from the 2024-25 fiscal year to the applicable fiscal year is projected to be at a rate that is less than 3%, the credit is not allowed. The credit is not considered to be income or resources for the purpose of determining eligibility for the payment of public assistance benefits and medical assistance benefits authorized under state law or for a payment made under any other publicly funded programs. The department of revenue is authorized and encouraged to develop a means of refunding the credit in 12 equal monthly refunds rather than annually. For the 2024-225 state fiscal year, $178,491 is appropriated from the general fund to the department of revenue for the implementation of the act. APPROVED by Governor May 31, 2024 EFFECTIVE August 7, 2024(Note: This summary applies to this bill as enacted.)

Related Legislation

Votes