Charles Trautman, EA · Since 1969
How Colorado treats charitable gifts once your income reaches $300,000.
On your federal return, a gift to your church or a charity is a deduction: it lowers the income you pay tax on. Colorado starts from those same federal numbers, so for most people the gift lowers their Colorado tax too. But once your federal adjusted gross income reaches $300,000, Colorado adds nearly all of your deductions back, and the charitable gift goes with them. You can give the money away and still pay Colorado tax on it. Here is how that works, how it got this way, what other states have done, and what donors can still do about it.
Current as of October 2026. Part of our Colorado income tax series.
Colorado figures your tax by starting with your federal taxable income: your income after the federal standard deduction or your itemized deductions on Schedule A. Charitable gifts are one of those itemized deductions, along with mortgage interest and state and local taxes.
If your federal adjusted gross income is $300,000 or more, Colorado makes you add most of that deduction back. The state calls this the federal deduction addback. For tax year 2025 you keep the first $12,000 (single) or $16,000 (joint) of your deductions. Starting with tax year 2026, under Proposition MM, you keep only $1,000 (single) or $2,000 (joint). Everything above that is added back and taxed at 4.40%.
The addback doesn’t single out charity. It takes back the whole Schedule A total. But for a generous giver, the charitable gift is usually the biggest number on that schedule, so it’s the gift that does most of the losing.
There is no phase-in. At $299,999 of AGI your full deduction counts in Colorado. At $300,000 almost none of it does.
A deduction lowers the income you’re taxed on. A $1,000 deduction at Colorado’s 4.40% rate saves you $44. A credit comes straight off the tax itself, so a $1,000 credit saves you $1,000. Schedule A gives you deductions. Colorado does offer a few true credits for certain gifts, covered below, and the addback doesn’t touch those.
A married couple filing jointly with $400,000 of federal AGI. They give $100,000 to their church and other charities and pay $50,000 of mortgage interest. The right-hand column shows the same family on their 2026 return, when the allowance drops and a new federal floor applies.
| Step | 2025 return | Same family, 2026 |
|---|---|---|
| Charitable gifts | $100,000 | $100,000 |
| Less the federal floor (0.5% of AGI, new for 2026) | — | −$2,000 |
| Charitable deduction on Schedule A | $100,000 | $98,000 |
| Mortgage interest | $50,000 | $50,000 |
| Total federal itemized deductions | $150,000 | $148,000 |
| Colorado lets them keep (joint) | $16,000 | $2,000 |
| Colorado addback: taxed as if never deducted | $134,000 | $146,000 |
| Colorado tax on the addback at 4.40% | $5,896 | $6,424 |
| Part of that caused by the charitable gift | $4,400 | $4,312 |
Their $50,000 of mortgage interest already uses up the $16,000 allowance, so every dollar of the gift is added back in both years. The same couple at $290,000 of AGI would add back nothing, and the gift would lower their Colorado tax by $4,400. Simplified example; actual returns have more moving parts.
Above the line, every $1,000 you give to charity costs about $44 of Colorado tax that a donor below the line doesn’t pay. The gift still saves federal tax. It just stops saving Colorado tax.
This cliff has been a big surprise for our high-income clients who give generously. People give because they care about their church or their cause, but the tax savings has always been a welcome side benefit, and with larger gifts it’s often part of the plan. Most of our clients first learn that Colorado takes that benefit away when we prepare their return, after the gifts are made. Many take it as an insult: they gave the money away and are still paying Colorado tax on it.
The cliff works against giving. Hawaii’s own legislature reached that conclusion about its cap and took charity out of it. A donor above Colorado’s line gives up the state tax break that a donor below the line still gets, so every gift they make costs them more. That makes each of those gifts all the more an act of generosity.
If you give at this level, you are clearly a generous person, and your community thanks you. Just know that above $300,000, your gift won’t lower your Colorado tax. There are still ways to give that Colorado can’t take back; see what donors can still do, or call us before year-end.
Three steps over four years, two of them approved by voters.
| Tax year | Who is affected | What they keep |
|---|---|---|
| 2022 | AGI of $400,000 or more who itemize. Set by HB21-1311, a 2021 tax package that also raised the state earned income credit and created a state child tax credit. | $30,000 single / $60,000 joint of itemized deductions, charity included |
| 2023–2025 | AGI of $300,000 or more, itemized or standard deduction. Proposition FF, approved by voters in 2022 to pay for free school meals. | $12,000 single / $16,000 joint |
| 2026 and later | Same group. Proposition MM, approved by voters in November 2025 to fully fund the school meals program. | $1,000 single / $2,000 joint |
Source: Colorado Department of Revenue, Individual Income Tax Guide (January 2026), Part 3. The 2026 limits come from the voter-approved ballot text of Proposition MM.
Colorado does let people who take the standard deduction subtract charitable gifts above $500. That break is two decades older than the cap and was never presented as a trade for it. It began in 2000 as one of the ways Colorado paid out TABOR surpluses, and the legislature made it permanent in 2010. The cap was about raising revenue: first as part of a 2021 tax package, then twice by voters to pay for school meals. It helps a different group of donors and does nothing for a high earner who itemizes.
Colorado isn’t the first state to cap deductions for high earners. It is unusual in leaving charitable gifts inside the cap.
In 2011 Hawaii capped itemized deductions, charity included, at $25,000 single / $50,000 joint for higher incomes (Act 97). Two years later the legislature took charitable gifts out of the cap (Act 256, effective for 2013 returns). Its own committee report found the cap had “resulted in a disincentive for taxpayers to contribute to charitable organizations” and “caused a significant reduction in funding.” Hawaii nonprofit groups estimated giving fell by about $60 million a year against roughly $12 million of expected state revenue.
When North Carolina rewrote its income tax, it limited mortgage interest and property taxes to $20,000 combined but left charitable contributions outside that cap. Lawmakers later looked at capping all itemized deductions at $20,000; the state’s nonprofits pointed to Hawaii, and charity stayed out.
For balance: several states with an income tax, including Illinois, Pennsylvania and New Jersey, allow no state deduction for charitable gifts for anyone, at any income. A Colorado donor under $300,000 is treated better than a donor in those states.
Colorado gives a full charitable deduction below $300,000 and almost none above it. Among states that have capped deductions for higher earners, we haven’t found another that still includes charitable gifts in the cap.
None of these changes the rule. They change how the gift reaches the charity, or when.
A qualified charitable distribution goes straight from your IRA to the charity, up to $111,000 per person for 2026. It never shows up in your income, so there is nothing to deduct and nothing for Colorado to add back. It also counts toward your required minimum distribution and lowers AGI, which can keep you under $300,000. The money must go directly from the IRA custodian to the charity, and it can’t go to a donor-advised fund.
Donate shares you’ve held more than a year and you never report the gain, so Colorado never taxes it at 4.40%. The deduction itself is still added back above $300,000, but the tax you avoid on the gain is real. Example: stock bought for $10,000 and now worth $50,000 avoids $40,000 of gain and about $1,760 of Colorado tax.
If your income swings from year to year, make larger gifts in a year when AGI is under $300,000, when Colorado honors the full deduction. A donor-advised fund lets you take the deduction in that year and send grants to charities over the years that follow.
These are credits, not deductions, so the addback doesn’t reach them. The child care contribution credit is 50% of a cash gift to a qualifying Colorado child care program, up to $100,000 of credit a year, extended in 2026 through tax year 2037. The enterprise zone contribution credit is generally 25% of a gift to an approved enterprise zone project. Both are nonrefundable, and you can’t claim both for the same gift. The charity gives you the certification form.
Starting with 2026, itemizers can deduct charitable gifts only to the extent they exceed 0.5% of AGI, and people in the top 37% bracket get at most 35 cents of federal benefit per dollar deducted. Non-itemizers get a new federal deduction of up to $1,000 single / $2,000 joint for cash gifts. A qualified charitable distribution sidesteps all of it.
Your federal deductions, charitable gifts included, carry straight into Colorado. That’s most Colorado households.
If you don’t itemize federally, Colorado lets you subtract charitable gifts above the first $500 on Form DR 0104AD. Keep your receipts; the federal rules decide what counts. IRA gifts made as qualified charitable distributions don’t count here, because they were never in your income.
Near the line, or planning a large gift? Run the numbers before you write the check, not after. See also the $300,000 cliff in our Colorado highlights.
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.