Colorado has created a unique state tax credit designed to encourage greater private contributions promoting child care throughout our state. The Child Care Contribution Credit can provide a sizable tax benefit for donors who financially support charities focused on the care and development of children in Colorado.
When a donation is made to an eligible charitable organization (e.g., Advocates for Children CASA), the Child Care Contribution Credit may allow a donor to claim a tax credit equal to 50% of the total donation.
The Child Care Contribution Credit may be claimed by individual donors, by partnerships and corporations, and by estates and trusts.
Importantly, the benefits of the Child Care Credit supplement, rather than replace, the tax benefits already in place at the state and federal levels. That is, a donor may still claim the federal charitable deduction and the state charitable deduction, with the Child Care Credit reducing any remaining state tax on a dollar-for-dollar basis.
The following chart summarizes the tax benefits of a hypothetical $1,500 charitable donation:
|Federal Income Tax Bracket|
|Donor’s Charitable Contribution to CASA||$1,500||$1,500||$1,500||$1,500|
|Colorado Charitable Deduction||($69)||($69)||($69)||($69)|
|Federal Charitable Deduction*||($191)||($225)||($238)||($269)|
|Colorado Child Care Contribution Credit||($750)||($750)||($750)||($750)|
|Total Tax Savings||($1,010)||($1,044)||($1,058)||($1,089)|
|Total Out-of-Pocket Cost to Donor||$490||$456||$442||$411|
|*Only eligible for a minimum gift of $500|
|*Lower state income taxes yields a smaller state-tax deduction for federal income tax purposes|
|*All figures are provided for illustration only. Please consult with your tax advisor for personalized tax advice.|
Some limitations apply to the Child Care Credit. In-kind contributions (e.g., stock, real estate, privately-held shares, etc.) are ineligible. The credit is not “refundable” (i.e., if a donor’s tax is already reduced to $0, the Child Care Credit cannot produce a refund check), but excess credits may be carried forward for up to five years. The credit is capped at $100,000 per year.
For more information, please consult with your tax advisor. The Colorado Department of Revenue also provides the following public resources:
– FYI Income 35 (see: https://www.colorado.gov/pacific/sites/default/files/Income35.pdf)