Earned Income Tax Credit: Money Back for Working Families
Why EITC Awareness Day?
Colorado Fiscal Institute advocates for tax and budget policies that make economic prosperity for every Coloradan a reality. In this pursuit, we back targeted, common-sense policies that invest in and help build power for Coloradans who earn middle and low incomes. The Earned Income Tax Credit (EITC) is a prime example of a targeted tax policy promoting equity, and has long been among CFI’s top priorities.
The EITC is a refundable, cash-back tax credit for families who earn low incomes. This means families could get money back even if they owe $0 in taxes in a given tax year. Originally enacted at the federal level in the 1970s, the policy has a history of bipartisan support, and its efficacy is backed by decades of research. Children in families who claim the EITC have better outcomes at birth, improved education outcomes, and increased lifetime earnings. Colorado should do all we can to ensure families are able to find and claim this and other refundable credits (i.e. the Child Tax Credit) they qualify for.
Friday, January 26, 2024 is EITC Awareness Day. Each year, CFI collaborates with partners, legislators, and supporters in the effort to uplift the EITC, and spread awareness of its importance as a policy. EITC Awareness Day is a national effort CFI is proud to take part in. This year, in honor of the largest EITC in our state’s history, the Governor has issued a proclamation honoring the day. We have written a brief overview of where the state EITC stands today, outlined some points for continued improvement, and compiled an index of resources on all things EITC.
Expansions to the Colorado EITC
Since 1999, CFI, along with advocates, community members, and legislative champions, has been at the forefront of advocating for the implementation of, expansion to, and outreach efforts for the EITC — and we’ve won. In 2013, Senate Bill 001 made the state EITC permanent and set the credit amount at 10% of the federal. In 2020, we made the credit available to people who file taxes using an ITIN and in 2021 we doubled the credit amount to 20%. Most recently in 2023, Colorado increased the state credit to a 50% match of the federal EITC. These expansions of the EITC in the last several years have helped make Colorado’s tax code more fair.
Successes in our state have been part of a national trend toward recognizing the impact and importance of direct cash to families. As described in one of our fall blogs, federal relief efforts during the COVID-19 pandemic — including a temporary expansion of the federal EITC and CTC — helped produce the lowest child poverty rate on record. Expiration of these temporary expansions have left families without the support they need and deserve in their endeavors to thrive. Whether at the federal or state level, EITC expansions, Child Tax Credit (CTC) expansions (like the one currently on the table in D.C.), and like investments in the people who keep our economy going will make our country, state, and communities more equipped to prosper during the good times, and endure during bad.
Uptake and Future of the EITC
However, even with all of this progress, there is much work to be done, in particular during the 2024 legislative session. Expansions to the EITC are set to expire in the next two years. Without legislative action, Colorado’s EITC will be cut by more than half, declining to 20% by 2026. In order to maintain and further the progress Colorado has made in our tax code, these expansions must be made permanent.
Additionally, Colorado needs more outreach and policy intended to increase the uptake rate of the state EITC; in 2020 in Colorado, more than one quarter (28%) of those eligible for the EITC did not claim the credit. We know people are working extra hard to make ends meet, and Colorado must do more to ensure families don’t leave money on the table because they don’t know about the tools available to them.
Resource Index
To continue building on all of the EITC policy wins, CFI has compiled an index of tools for organizations interested in helping their supporters and members access resources, or for individuals looking for information about the EITC and other refundable tax credits they may be eligible for.
For Individuals
- Tax Help Colorado – Tax Help Colorado provides free tax preparation services, helping you receive the refund you are owed.
- Get Ahead Colorado – Get Ahead Colorado is a public information campaign encouraging tax filing from the Colorado Department of Public Health and Environment (CDPHE).
- Get It Back Campaign – The Get It Back Campaign helps eligible individuals claim tax credits and use free tax filing assistance to maximize tax time.
- IRS EITC Information – Check if you qualify and learn how to claim the credit.
For Organizations and Partners
- CFI’s EITC Day 2024 Digital Toolkit
- Get Ahead Colorado
- Get It Back Campaign
- Prosperity Now EITC Awareness Day Resources
- IRS EITC Awareness Day Tool Kit
