Colorado Earned Income Tax Credit

When you file your tax return, you're likely made aware of whether or not you qualify for a federal earned income tax credit (EITC), and if so, you may also be eligible to receive one on the state level. Taxpayers who live in Colorado follow the federal government's eligibility requirements. The state EITC offers a credit based on 10% of the federal credit amount.

Colorado's state EITC is fully refundable as well, which means that the credit can be greater than the residents' annual income tax liability. Any amount exceeding the income tax due is paid to the Colorado taxpayer as a refund, and any Colorado family without income tax liability can receive the entire EITC amount as a refund.

This concept of refundability is what is at the heart of the earned income tax credit. By allowing lower income families to receive the credit amount as a refund after offsetting the amount of owed taxes, families get to keep a larger portion of their earnings.