Colorado Earned Income and Child Tax Credits

Quick Facts

• Colorado Earned Income Tax Credit (COEITC): Refundable credit equal to 50% of the federal EITC starting in tax year 2024 (filed in 2025).
• Colorado Child Tax Credit (COCTC): Refundable credit for children under six, offering $600–$1,200 per child based on income and filing status.
• Eligibility: Available to filers using Social Security numbers or ITINs who qualify for the corresponding federal credits and meet Colorado residency requirements.
• Claim method: File Colorado Form 104 and include Schedules EIC and CTC.
• Impact: Combined with federal credits, Colorado families can receive thousands of dollars in refunds to cover essentials.

Program Overview

Colorado boosts federal family tax benefits with generous state credits. The Colorado Earned Income Tax Credit supplements the federal EITC for low- to moderate-income workers. Recent legislation increased the credit percentage to 50% of the federal amount, significantly raising refunds. Colorado also launched a refundable Child Tax Credit for households with young children, targeted at incomes up to $95,000 (single) or $135,000 (joint).

These credits aim to reduce child poverty and support work by increasing take-home pay. Refunds arrive even when no Colorado income tax is owed. Families should leverage free tax filing resources to ensure they receive the full amounts.

Eligibility Requirements

1. Colorado residency: You must file a Colorado income tax return and have resided in the state for at least part of the year. Nonresidents may claim the credits on part-year returns proportional to Colorado income.
2. Federal EITC qualification: To claim the COEITC, you must qualify for the federal EITC by meeting income, filing status, and qualifying child rules. Workers without children must be 25–64 unless they qualify as former foster youth or veterans under federal expansions.
3. CO Child Tax Credit qualifications:
   • Have at least one child under age six at the end of the tax year.
   • Adjusted gross income (AGI) below $95,000 for single/head of household or $135,000 for joint filers. Credit phases out above those thresholds.
   • Claim the federal Child Tax Credit or Additional Child Tax Credit.
4. Identification: Social Security numbers or ITINs are accepted for filers and qualifying children.

Benefit Calculation

• COEITC: Multiply your federal EITC amount by 0.50. For example, if your federal EITC is $3,800, your Colorado credit is $1,900.
• COCTC: Sliding scale based on income and filing status. For AGI up to $25,000 (single) or $35,000 (joint), the credit is $1,200 per child under six. It phases down to $600 as income approaches the cap.
• Refundable: Both credits are fully refundable and paid even if no tax is owed.
• Interaction: Credits stack with other Colorado benefits such as the Child Care Expenses Credit and Family and Medical Leave premium refund.

Application Process

1. Prepare federal return: Complete IRS Form 1040, Schedule EIC, and Child Tax Credit calculations. Colorado uses these figures.
2. Collect documentation: W-2s, 1099s, self-employment records, Social Security or ITIN documentation, and proof of residency (lease, utility bills).
3. Complete Colorado Form 104: Use tax software, the Revenue Online portal, or paper forms. Attach Schedule COEIC (DR 0104EIC) and Schedule COCTC (DR 0104CTC).
4. Report federal credit amounts: Enter your federal EITC on Schedule COEIC and calculate 50%. For the COCTC, input number of eligible children and AGI to determine the credit tier.
5. File by April 15: Request an extension if needed, but pay any balance due by the deadline to avoid penalties. Refunds are issued via direct deposit or paper check.
6. Track refund: Use Revenue Online to monitor status. Most refunds arrive within 3–4 weeks when e-filed with direct deposit.

Documentation Checklist

• Valid identification for filer and children.
• Social Security numbers or ITINs.
• Proof of age for children under six (birth certificate, medical records).
• Income statements (W-2, 1099, Schedule C records).
• Bank account information for direct deposit.
• Records of childcare expenses if also claiming other credits.

Strategies to Maximize Benefits

1. Combine credits: Claim federal EITC/CTC, Colorado credits, Child Care Expenses Credit, and property tax/rent/heat rebate if eligible.
2. Use free tax assistance: Colorado VITA, Tax Help Colorado, and AARP sites offer free preparation for incomes up to $64,000. They ensure accurate credit calculations.
3. Plan for self-employment taxes: Self-employed workers must report net income to qualify. Deduct expenses but maintain positive earnings to receive credits.
4. Time income intentionally: If your income fluctuates, consider deferring additional hours or bonuses to stay within credit thresholds.
5. Update ITINs: Renew expiring ITINs before filing to prevent delays.
6. File even with low income: You can claim credits for up to four prior years if you file returns, so submit missed returns to capture refunds.

Common Errors to Avoid

• Incorrect child ages: The COCTC only applies to children under six on December 31. Verify birthdates.
• Missing schedules: Failing to attach DR 0104EIC or DR 0104CTC can delay refunds. Ensure forms are included when mailing.
• Using ineligible filing status: Married couples filing separately cannot claim the federal EITC or COCTC.
• Underreporting income: All earned income must be reported, including gig work. Colorado cross-checks federal data.
• Bank account mistakes: Double-check routing/account numbers to prevent refund delays.

Interaction with Other Programs

• Colorado Child Care Expenses Credit: Families with childcare expenses can claim both credits, increasing refunds.
• Family and Medical Leave Premium Refund: Low-income workers can claim a refund of FAMLI premiums paid; coordinate with credits for maximum relief.
• Public benefits: Refunds from refundable credits generally do not count as income for SNAP, Medicaid, or TANF, but retain documentation.
• State sales tax refund: Filers with low income may also receive the Colorado Sales Tax Refund when filing Form 104.

Example Scenarios

• Married couple with two young children: Jamie and Priya earned $40,000. Their federal EITC is $4,500; Colorado credit adds $2,250. They also receive $2,400 from COCTC (two children under six). Combined with federal credits, they receive over $9,000.
• Single parent with one toddler: Maria earned $22,000. She qualifies for federal EITC of $3,600, Colorado EITC of $1,800, and COCTC of $1,200. She uses refunds to secure stable housing.
• Self-employed gig worker: Andre drives for rideshare services, netting $18,000 after expenses. He files Schedule C, pays self-employment tax, and receives $1,000 federal EITC plus $500 COEITC and $1,200 COCTC for his two-year-old.

Resources

• Colorado Department of Revenue tax credits page
• DR 0104EIC instructions
• DR 0104CTC instructions
• Revenue Online account
• Tax Help Colorado locations

Additional Tips

• Save part of your refund: Consider splitting refunds into savings or CollegeInvest 529 accounts.
• Guard against identity theft: File early to prevent fraudulent claims. Use IRS IP PIN if available.
• Keep records: Retain tax returns, W-2s, and childcare receipts for at least four years.
• Plan for next year: Adjust withholding or estimated payments to avoid large balances due that could offset refunds.