Your Local Contributions Could Go Further

Your Local Contributions Could Go Further

Colorado Tax Credit Explained

Written By: Allison Schmidt, Financial Advisor, CFP®, CPA

There is a pretty remarkable Colorado State Tax Credit (think 50% Credit) that can be claimed for cash donations to qualifying Colorado Child Care providers and programs called the Colorado Child Care Tax Credit (CCCC).  The math is compelling.  If you’re charitably inclined this could allow you to make an even larger impact for an organization or maybe claim a credit for a donation you’re already making.

I explored the credit in more detail recently when my wife, Stacy, and I got involved with The Boys & Girls Club of Metro Denver.  We were moved by the club’s mission.  We provide our Members with a safe, supportive, fun, and enriching environment that inspires and empowers them to achieve their greatest potential.  As moms of three strong young girls who try our best to empower them and creating positive environments for them, we wanted to get involved.  We and our firm, Higgins & Schmidt Wealth Strategies, got involved and the benefit of the Colorado Child Care Tax Credit allowed us to make a larger impact. 

Tell me more…

THE MATH

Tax Credit, not deduction?  Yes, that’s right, CREDIT.  The CCCC offers individuals and businesses who make cash donations (key word cash, no in-kind securities for this one) a credit of 50% of their total contribution against their Colorado State income tax.  But wait there’s more…you’re also still able to take the remaining 50% and deduct on your Federal Taxes, as an Itemized Deduction.  So if you’re in the highest tax bracket (37%) your tax benefit would be just under 70% of your donation.  That math makes this a highly attractive option for taxpayers looking to reduce their tax liability while supporting their favorite childcare services, like The Boys & Girls Club of Metro Denver. 

Who qualifies… You must make the contribution to a licensed child care center, family child care homes, group homes, school-age child care facilities, or agencies that provide grants and loans to support child care services in Colorado.  That sounds like a lot organizations…it sure is.  Here is the list: Colorado Licensed Child Care Facilities Report

So I just send a check?  Kind of.  You send the check, but you also need to have the organization fill out this form, DR 1317.  Then you pass that form and proof of your donation along to your accountant and you’re there. 

I’m proud that Colorado provides this benefit to incentivize donations to worthy organizations like The Boys & Girls Club of Metro Denver.  The credit not only benefits the donor with a significant tax savings, but also supports child care providers by likely increasing their resources with increased donations.  This will improve the quality and availability of child care services in Colorado.  Speaking as a mom of 3 young kids, these are services that are desperately needed.  I would guess that many of the parents reading this can relate to the months (maybe years) long waitlist warning that accompanies your daycare application.  Enhanced funding could lead to better facilities, more training for staff, and more spots for children, which supports working families and contributes to the overall well-being of our communities.  I’m excited about this and want to make sure everyone knows about the opportunity to amplify your impact.  Speaking of opportunity, if you’re a business owner and qualify for the Qualified Business Income deduction, there may be yet another tax strategy to implement utilizing the CCCC.  Questions?  Please don’t hesitate to reach out and let me know if you’d like to chat through how it would work for you.