Middle- and lower-income Coloradans, especially those with children, will receive tax credits worth thousands of dollars when they file their taxes in 2026. But whether those tax breaks continue to ease their financial strain in the years beyond will depend on how lawmakers respond to the state’s budgetary turmoil. As the laws are written now, families won’t receive the expanded credits when they file taxes in 2027. State lawmakers in recent sessions have made targeted tax credits for lower-income Coloradans and families a priority. The Democratic majority, which occupies nearly two-thirds of the seats in each chamber of the legislature, sees the credits as a potent tool to fight income inequality and lift people out of poverty. Now they have data to back up that argument. Over the past year, the slew of expanded tax credits helped cut child poverty in Colorado by 40.5%, according to a draft report from Washington University and Appalachian State University researchers. That mark was good enough to give Colorado — which had tied for 6th in the nation in one 2024 study — the lowest rate of childhood poverty in the country, according to the new research, scheduled for official release in early 2026. “It’s so impactful that we help these families who are at the lower end of our economic spectrum,” said Sen. Chris Kolker, a Centennial Democrat who helped run one of the tax credit bills. “We have so much wealth in this state and so much poverty.” Sen. Chris Kolker at the start of the 2024 Colorado General Assembly at the Colorado State Capitol in Denver on Jan. 10, 2024. (Photo by RJ Sangosti/The Denver Post) But, he added: “Math doesn’t lie on this stuff. It’s, ‘What can we afford to do?’ ” And that’s where lawmakers face a challenge. The prospect of a tight budget year, including the possibility that the state will collect no tax dollars over the revenue cap set by the Taxpayer’s Bill of Rights, or TABOR, means Colorado may see a high point in addressing child poverty before it has to pull back those credits. Because of shrinking revenue, the state won’t provide its increased match of the federal Earned Income Tax Credit, or EITC, and is poised to shut off its new Family Affordability Tax Credit — which provides hundreds of dollars in direct payments — when Coloradans file their taxes in 2027. ‘One of the most powerful tools we have’ When Coloradans filed their taxes in 2025, nearly 300,000 filers across every county qualified for the Family Affordability credit, for an average of $2,700 per filer. More than 330,000 qualified for the state’s expanded EITC, for which state tax dollars add 50% to the federal credit, for an average of $1,191. And 127,500 qualified for the Child Tax Credit, for about $900 per filer, according to the Department of Revenue. The three credits distribute differing amounts of money to filers based on their income levels and the number of qualified children. Each has its own specific qualifications, such as the amount of earned income reported. Families may be able to claim more than one credit. Those credits will continue to roll out this upcoming tax season. The newest break, the Family Affordability credit, for instance, will send money to single filers with $15,000 or less in reported income or joint filers who report $26,000 or less. It will provide $3,273 per child under the age of 6 and $2,455 per children ages 6 to 16. The credit scales down, based on income, to $123 per young child and $92 for older children for individual filers making between $80,000 and $85,000. The income limit is $96,000 for joint filers. Reps. Chris deGruy Kennedy, left, and Jenny Willford, right, clasp hands as votes come in supporting HB24-1311 during the final day of the 2024 legislative session at the Colorado Capitol in Denver on May 8, 2024. HB24-1311 is the Family Affordability Tax Credit bill. (Photo by Helen H. Richardson/The Denver Post) The federal government set the 2025 poverty line at $32,150 per year for a family of four. For tax year 2024, the Family Affordability credit and expanded EITC match provided more than $1.2 billion to qualified taxpayers, according to research by the Colorado Department of Revenue. The money for the credits comes from surplus state revenue, meaning that it eats into the TABOR sales tax refunds generally due to Coloradans as part of their income tax returns. Those refunds, which return more money to higher-income individuals on the theory that they paid more in excess taxes, will credit $19 to single filers if they report $52,000 or less in income and $59 to those who earn $299,001 or more, the highest income tier. The credits are also designed to shut off if the state budget doesn’t grow at a certain clip. This budget year, the state budget’s growth is projected to be lower than what’s allowed by TABOR because of federal tax changes. Gov. Jared Polis’ office has warned that the lower growth means the tax credits will be shut off. Colorado will cut its match of the federal EITC in half, to 25% of the federal credit, when residents file their taxes in 2027. State law is written to shut off the Family Affordability credit altogether if the state doesn’t have enough money. “The Family Affordability Tax Credit was intentionally designed to be funded only in years when Colorado has a budget surplus — and when we do, it’s one of the most powerful tools we have to reduce child poverty and stabilize family budgets,” said state Rep. Jenny Willford, a Northglenn Democrat who sponsored the law. “… This is money that went straight to groceries, rent, utilities, doctor’s visits and back-to-school needs. “In a tough budget year, the reality is that this proven credit may not be available, but that doesn’t diminish its impact. Rather, it underscores how effective it is when we choose to invest directly in Colorado families.” Credits called ‘a model’ — except for triggers Reams of research show the effectiveness of direct tax credits like the Earned Income Tax Credit in helping low-income people, said Kathy White, executive director of the progressive Colorado Fiscal Institute. The credits help people find economic stability from which they can build better futures, versus being stuck in cycles of debt, while the cash is also recirculated in local economies, she said. She called Colorado’s expanded credits, particularly the Family Affordability credit, “a model for the country.” “Except for this trigger business,” White added. “That is not a model.” Lawmakers built in a trigger to the credits so that they wouldn’t compete with other state priorities, such as Medicaid, K-12 education or the court systems, said White, who advocated for the credits. The recent tax credits were instituted following the flush post-COVID pandemic years, when the state was refunding hundreds of millions of dollars per year to taxpayers. Now, the state is grappling with another divide between rising costs and a cap on how much it can spend via TABOR. Recent changes to the federal tax code, which Colorado’s code mirrors, may likewise drop the state below the TABOR cap. That means less money that the state must refund to taxpayers, whether through traditional direct payments or targeted tax credits. The federal changes also put the state budget below the trigger for the credits, jeopardizing them for the 2026 tax year. “The problem is now these families are going to lose the credits … at a time when they probably could use them the most, and not at a time when Colorado did anything wrong,” White said. “Our policymakers did not make this choice.” Related Articles Conspiracy theorist-podcaster joins crowded GOP race for Colorado governor, but will candidacy ‘go nowhere’? Former US Sen. Ben Nighthorse Campbell, of Colorado, dies at 92 Colorado prison backlogs for sex offender rehabilitation lead to missed parole dates, others getting out without treatment Freed from ICE facility, activist Jeanette Vizguerra urges detainees: ‘Don’t give up. Keep fighting.’ Aurora neighborhood claims victory — for now — in halting 32 oil and gas wells near reservoir State Rep. Emily Sirota, a Denver Democrat who chairs the Joint Budget Committee, said lawmakers are working on ideas to keep the funds sustainable — especially after such promising early results. But “we are just in a really terrible space,” she said, with the impacts from changes to the federal tax code, the cap limiting state spending and other policy changes. “It’s disappointing to know we’re in this situation, when these credits that we created did have such a tremendous impact on low-income Coloradans and lowering child poverty,” Sirota said. “I think that’s a tremendous victory for the possibilities of what fiscal policy can do for people when we are being intentional.” The state’s fiscal picture for the upcoming budget year, which runs July 1 through June 30, 2027, won’t crystalize until March. The Joint Budget Committee will then finalize the state’s spending plan. The committee is already puzzling over how to bridge another $1 billion gap between expected costs and state revenues. Adding to the puzzle is that the biggest cost driver comes from the state Medicaid program, the health insurance program for low-income Coloradans — potentially pitting these anti-poverty tax credits against health care intended for the same group of people. When the legislature convenes this January,  lawmakers will need to grapple with the question of “where are we, as a state, in having the stomach to keep this as a priority?” Kolker said. “I know that electeds, like myself, have always been clear about our priorities of supporting people on the lower end of the economic spectrum,” Kolker said. “That hasn’t changed. … It’s just (a matter of) how do we do it? And how do we continue to fund it? Because Medicaid is also a big factor for these working families.” Stay up-to-date with Colorado Politics by signing up for our weekly newsletter, The Spot. ...read more read less