On Friday, May 31, Colorado Governor Jared Polis signed a new tax credit bill that seeks to provide support and help families save money.

Colorado Passes New Tax Credit for Parents

HB24-1311, also referred to as the Family Affordability Tax Credit, introduces a refundable credit that is accessible to parents.

The new family affordability tax credit that received Polis' signature is the most expensive individual tax credit to date. Advocates argue that it is one of the most impactful. The initiative would help elevate over 50,000 children from poverty.

The new law, known as House Bill 1311, will allocate approximately $700 million annually from the state revenue growth limit established by the Taxpayer's Bill of Rights, or TABOR. 

The program will provide $3,200 per child under the age of 6 to the most economically disadvantaged families in Colorado, Yahoo reported. 

The credit amount will decrease as children age and family incomes rise, reaching zero at $85,000 per year for joint filers when children reach 17 years old.

This year, the legislature has passed or expanded several tax credits, including an increase to the state's match of the Earned Income Tax Credit. 

The child tax credit is one of these credits that can be stacked on top of others. Overall, the new policies redirect a significant amount of money from projected TABOR surpluses in the upcoming years that would have otherwise been returned to taxpayers.

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Colorado Families Could Receive Hefty Financial Boost

The Colorado Fiscal Institute, a think tank involved in crafting the legislation, projects that families could potentially receive up to $4,400 annually per child aged 5 and younger. 

According to the Denver Post via MSN, this would be made possible through an expanded child care tax credit and the introduction of a new family affordability tax credit.

Including the increase in the Earned Income Tax Credit, which can provide up to 50% of the federal EITC to support low-income households, Colorado families may receive substantial financial assistance. 

This year, the state EITC match has been doubled, resulting in an additional $1,900 for working families with three or more children who have very low incomes.

The credits are contingent upon the stability of TABOR surpluses and will be reduced during periods of economic downturn. 

According to Caroline Nutter, the legislative coordinator for the think tank, the credit changes are projected to significantly decrease the number of children in poverty. It is estimated that around 133,000 kids, which accounts for a 40% reduction, will benefit from the fully funded credits.

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