Charles Trautman, EA · Since 1969
What’s already law, and what’s on the November ballot.
Tax year 2026 is the return you’ll file in early 2027, and it will look different: no TABOR refund at all, the family affordability credit switched off, the EITC cut in half, overtime pay taxed again, and a much tougher deduction addback for high earners. Then there’s the November 2026 ballot, which could replace the flat tax entirely. Here’s the state of play, with enacted law kept separate from proposals.
Current as of October 9, 2026 · Check back after the November 3 election
These are signed into law and take effect for tax year 2026.
The State Controller certified in September 2026 that revenue for the 2025–26 fiscal year came in about $176 million under the TABOR cap. No surplus means no sales tax refund and no temporary rate cut on 2026 returns, the first time in several years. Forecasters expect surpluses to return in 2026–27, which would mean refunds again on 2027 returns.
HB25-1296. The federal “no tax on overtime” deduction is added back on the Colorado return starting in 2026; there’s a new line for it. Employers are being told to keep withholding Colorado tax on overtime. A TABOR lawsuit challenging the addback is pending, and bills to repeal it failed in both the special session and the 2026 session. Tips are not added back; the federal tips deduction still flows through.
Proposition MM, passed by voters in November 2025, cuts the allowance from $12,000 / $16,000 to $1,000 (single) / $2,000 (joint). If your federal AGI is $300,000 or more, nearly your entire federal standard or itemized deduction is added back, charitable gifts included. The money funds the school meals program. What this means for donors.
HB25B-1001 from the August 2025 special session. Same thresholds as before: federal AGI over $500,000 single / $1,000,000 joint. It had been scheduled to expire after 2025.
The Segal AmeriCorps education award (HB24-1240) and first responder death benefits (SB25-310) become subtractions on the 2026 return.
CollegeInvest and Colorado ABLE contribution subtractions go to $26,200 (single) / $39,200 (joint) per beneficiary for 2026, up from $25,400 / $38,100.
No change: 65 and older subtract all Social Security; 55 to 64 subtract all of it with AGI of $75,000 / $95,000 or less; pension subtraction $20,000 / $24,000. A 2025 bill to remove the age limits died. How the retiree subtractions work.
The pass-through entity election stays available. The federal SALT cap was raised to $40,000 and made permanent, so the election still matters for business owners above that.
Several Colorado credits are tied to the state’s revenue forecast. With no surplus, the triggers didn’t fire.
| Credit | 2025 | 2026 |
|---|---|---|
| Family affordability credit | Up to $3,273 / $2,455 per child | Not available |
| Colorado EITC (share of federal) | 50% | 25% |
| Colorado child tax credit (under 6) | $1,200 / $600 / $200 | Continues, inflation-adjusted |
| Child and dependent care credit | 50% of federal, AGI ≤ $60,000, plus low-income version | One credit: 70% of federal (computed as if fully refundable), AGI ≤ $60,000; low-income credit repealed; no federal-liability limit |
| Electric vehicle credit | $3,500 (+$2,500 under $35,000 MSRP) | $750 (+$2,500 under $35,000 MSRP) |
| Heat pump credit (through contractor) | $1,500 air-source / $3,000 ground-source | Halved |
| E-bike point-of-sale discount | $450 | $250 |
| Early childhood educator credit | $872 – $1,743 | Expired |
| Qualified care worker credit | $1,200 | $1,200 (through 2028) |
| Colorado Promise tuition credit | Available | Available (through 2032) |
| Disability assistance credit | $400 – $1,200 | Continues, inflation-adjusted |
| Senior housing credit | Not available | Not available |
| Residential energy storage credit | 10% | 10% (extended through 2029) |
Sources: DOR January 2026 tax policy updates, DOR income tax topics, HB24-1134, HB24-1311, SB25-026, Legislative Council September 2026 forecast.
A single parent with two kids under 6 and $35,000 of income got roughly $4,700 from the family affordability credit alone on the 2025 return, plus 50% of the federal EITC. On the 2026 return the affordability credit is zero and the EITC match is half as big. Plan on a noticeably smaller Colorado refund in spring 2027, and don’t let it surprise you.
The 2026 legislature passed two big tax bills. Most of their provisions start with tax year 2027.
HB26-1223. Starting January 1, 2027, downloadable software and software subscriptions become subject to sales tax, and the revenue funds a new refundable credit for the same families who qualify for the family affordability credit. The amount is set each year to match the money raised; early estimates are around $260 per child under 6 and $195 per child 6–16, first claimed on 2027 returns.
HB26-1289 removes the revenue trigger and sets the credit at $2,000 for 2027 and $1,000 for 2028, with the extra $2,500 for vehicles under $40,000 MSRP and no credit above $50,000 MSRP.
Up to $2,000, refundable, with the income limit raised to $300,000. Delayed one year from the original proposal.
Workers over the federal age cap will qualify for the Colorado EITC starting tax year 2028.
Addback of gains deferred into non-Colorado opportunity funds; an elective “water’s edge” combined return for corporations; enterprise zone credit limits; and, from the special session, Hong Kong, Ireland, Liechtenstein, the Netherlands and Singapore added to the tax-haven list for combined reporting (that one is 2026).
HB26-1419. Because the 2024–25 refunds were calculated before the federal law reduced state revenue, the state will recover the overpayment by reducing future refund obligations, up to half per year starting in 2026–27. Expect a legal challenge.
None of this is law. Two of these measures contradict each other, and the Blue Book says it isn’t clear how a conflict would be resolved if both pass.
Would replace the 4.40% flat tax with six brackets from 3.7% to 8.4%, starting tax year 2027. Most filers with taxable income under $500,000 would see a cut of up to a few hundred dollars; income above $500,000 would be taxed at higher rates, and above $1 million at 8.4%. Removes TABOR’s single-rate requirement. Roughly $2 billion a year for schools, health care and early childhood.
A statutory cap on the individual and corporate rate at 4.4%. By itself it changes nothing; it exists to block Amendment 87. If both pass, the measure with more votes is expected to prevail, but that isn’t settled.
Would raise the TABOR cap so the state keeps roughly $500 million more in the first year for schools. The trade-off is smaller or no TABOR refunds in surplus years.
Would exempt sales tax on sporting goods from the TABOR cap. Minor for income tax purposes.
Advance Colorado’s suit argues the overtime addback is a tax increase requiring voter approval under TABOR. No ruling yet. Until a court says otherwise, the addback applies to 2026 income.
Bills to decouple Colorado from the federal bonus depreciation and R&D expensing rules (killed after a veto threat), to cap CEO pay deductions, and to sunset the overtime addback after 2026. None are law.
Make sure your employer is still withholding Colorado tax on overtime in 2026. If they stopped when the federal deduction appeared, you’ll owe it next April.
It won’t be there next spring. If you counted on that refund for rent or a car payment, adjust now.
The Proposition MM addback is a cliff, not a phase-in. A one-time event in 2026 that pushes AGI over $300,000 (a bonus, a stock sale, a Roth conversion) can cost you most of your federal deduction for Colorado purposes. Timing matters, especially for large charitable gifts; see giving over $300,000.
2026 is the worst year: $750. Unless you need the car now, 2027 is $2,000.
Keep AGI at or under $75,000 / $95,000 and all of it stays out of Colorado tax. A big IRA withdrawal in the wrong year can cost you the whole subtraction.
If Amendment 87 passes, 2027 withholding and estimated payments change for everyone. We’ll update this page the week after the election.
We prepare federal and Colorado returns together, year round, in Lone Tree.
These pages are general information, current as of October 2026, and are not advice about your situation. Colorado law changes every session, and the Department of Revenue updates its publications through the year. Confirm anything that matters to you at tax.colorado.gov or call us.