Colorado State Tax Credits

More ways to save your hard-earned money from the tax man!

Colorado has some great State Tax Credits for you....

Thank you so much for checking our resource out here for your state and congratulations for taking a proactive step to paying less in taxes. For your state, we have identified the tax credits that are currently being offered to help you pay less in state taxes.

We hope this resource is helpful to you, and if there is something you feel we have missed, please let us know!

It would be completely arrogant of us to think that we know all things and if we missed something we want to know so we can vet that and help you and our other friends in the entrepreneurial community pay less in taxes! And if you found this helpful, you should check out our DIY resources inside of our Tax Savings Communities (found at www.MakeTaxesFair.com/Our-Communities).

We're also ready to help you if you want to skip the line of the DIY process and get help directly from us. To learn more about how we help our clients check out www.MakeTaxesFair.com/Get-My-Roadmap

 
Colorado

Colorado Tax Credit for Employer Contributions to Employee 529 Qualified

Overview:
Colorado offers a state income tax credit to employers who contribute to their employees' CollegeInvest 529 education savings accounts. Employers can earn a 20% tax credit on their contributions (up to $500 per employee annually), encouraging businesses to invest in their employees’ futures while reducing their own tax liabilities.

Who It’s For:
Colorado-based employers—whether large or small—seeking to support their employees’ education savings while taking advantage of a valuable state income tax incentive.

Four Key Highlights:

  1. 20% Tax Credit on Contributions

    • Employers earn a 20% credit for contributions made to a CollegeInvest employee-owned 529 plan, capped at $500 per employee per year.

  2. Broad Employee Eligibility

    • Applies to full-time, part-time, temporary, and permanent employees.

    • Credit allowed regardless of the 529 plan’s named beneficiary.

  3. Carryforward Flexibility

    • If the credit exceeds the employer’s state tax liability, unused credits can be carried forward for up to three years, applied to the earliest possible tax year.

  4. Simple Compliance Requirements

    • Employers must complete Form DR 0289 and maintain detailed records of contributions for audit purposes.

    • Contributions must be made to CollegeInvest-managed plans only.

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Colorado Enterprise Zone (EZ) Program

Overview:
The Colorado Enterprise Zone Program offers a variety of state tax credits to businesses that locate, expand, or invest in economically distressed areas. Businesses in one of Colorado’s 16 designated Enterprise Zones can earn credits for investments, job creation, employee training, R&D, and commercial vehicle purchases, all designed to promote local economic development.

Who It’s For:
Businesses operating within designated Colorado Enterprise Zones (or Enhanced Rural Enterprise Zones) that are expanding operations, hiring employees, investing in equipment, providing job training, or engaging in R&D activities.

Four Key Highlights:

  1. Multiple Tax Credit Opportunities

    • Includes credits for investment (3%), job training (12%), new job creation ($1,100/job), R&D (3%), and commercial vehicles (1.5%).

  2. Annual Pre-Certification Required

    • Businesses must pre-certify annually with their local Enterprise Zone Administrator before starting activities to claim any credits.

  3. Enhanced Credits for Rural Areas

    • Businesses in Enhanced Rural Enterprise Zones can qualify for additional credits when creating new jobs, promoting rural growth.

  4. Detailed Documentation and Certification Needed

    • Businesses must maintain thorough records and complete forms like DR 0074 and the Enterprise Zone Certification Application to claim credits on their tax return.

 

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Colorado Works Program Employer Tax Credit

Overview:
This Colorado state tax credit encourages businesses to support employees receiving public assistance through the Colorado Works Program. Employers can claim a credit for providing eligible services like childcare, healthcare, transportation, and job training during an employee’s first two years of employment.

Who It’s For:
Colorado employers hiring employees who are currently receiving public assistance through the Colorado Works Program and willing to invest in specific support services for them.

Four Key Highlights:

  1. 20% Credit on Eligible Service Expenditures

    • Employers can claim 20% of qualifying expenditures (e.g., childcare, healthcare, job training, transportation) for up to two years per employee.

  2. Employee Eligibility Verification Required

    • Employers must verify employee participation in the Colorado Works Program through the county Department of Social/Human Services before claiming the credit.

  3. Strict Use of Funds

    • Only expenditures directly benefiting eligible employees qualify.

    • General business expenses that serve non-eligible employees do not qualify.

  4. Carryforward for Unused Credits

    • If the credit exceeds the business’s income tax liability, unused amounts may be carried forward for up to three years (non-refundable).

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Colorado Child Care Contribution Tax Credit

Overview:
This Colorado tax credit rewards individuals, businesses, and pass-through entities for making eligible monetary contributions to child care programs and facilities that promote care for young children in the state. Donors can claim a generous 50% credit against their state income tax while supporting critical early childhood development initiatives.

Who It’s For:
Colorado individual taxpayers, C corporations, estates, trusts, partnerships, and S corporations (with credits passed through to partners/shareholders) making cash contributions to qualified child care organizations.

Four Key Highlights:

  1. 50% Credit on Monetary Donations

    • Donors can claim 50% of the amount contributed to qualified child care facilities or programs, capped at $100,000 per taxpayer per year.

  2. Strict Qualification and Certification Rules

    • Contributions must be monetary only (cash, check, debit/credit) and certified by the recipient using Form DR 1317.

    • No credit for property, stock, or services donations.

  3. Carryforward Flexibility

    • Unused credits carry forward for up to five years, but must be applied to the earliest available tax years first.

  4. Impact on Federal Deductions

    • Some contributions may still qualify for federal charitable deductions, but federal rules limit deductions when state tax credits are also received (check IRS Publication 526).

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Colorado Employee Ownership Tax Credit

Overview:
This Colorado state program offers businesses tax credits covering up to 50% of the costs of converting to employee-owned models like ESOPs, worker cooperatives, or employee ownership trusts (EOTs). The goal is to promote broad-based employee ownership, with significant financial support for professional services needed during conversion.

Who It’s For:
Colorado-headquartered businesses with at least three full-time employees looking to convert into or expand an employee-owned business structure and willing to allocate at least 20% equity to employees (excluding founders).

Four Key Highlights:

  1. Covers Up to 50% of Conversion Costs

    • Credit amounts:

      • $25,000 for alternate equity structures

      • $40,000 for worker cooperatives or EOTs

      • $150,000 for ESOPs

    • Additional $25,000 bonus for expanding employee ownership by at least 20% (post-2024).

  2. Strict Eligibility and Application Process

    • Businesses must apply before completing the ownership conversion.

    • Must maintain good standing and be Colorado-headquartered for at least one year.

  3. Eligible Costs Include Professional Services

    • Covers expenses like accounting, valuation, legal services, succession planning, and technical assistance.

  4. No Carryforward — Refundable Credit

    • Credits must be used in the tax year the conversion is completed.

    • Any unused portion is refunded directly to the business (no carryforward needed).

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