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By Keirin Gonzalez
This year, many Coloradans may be shocked to see a steep drop in their tax refunds. The reason is simple: the Family Affordability Tax Credit, or FATC, is no longer available, caught in the fallout of sweeping federal tax changes and deep cuts to Colorado’s budget.
The passage of H.R. 1, the One Big Beautiful Bill Act, in July 2025 reshaped the federal tax code and, because Colorado conforms to federal law, reshaped ours as well. The law delivers roughly $4.5 trillion in tax breaks, largely benefiting corporations and the highest-income earners. Meanwhile, lower- and middle-income families are losing credits that helped them stay afloat, including the FATC.
About the FATC
Over the past decade, Colorado worked deliberately to build a more sustainable and livable economy for working families. Lawmakers expanded and layered tax credits aimed at reducing poverty and supporting children, including the state child tax credit, the earned income tax credit and, in 2024, the Family Affordability Tax Credit.
The FATC provided a refundable per-child credit for children younger than 17. Single filers earning less than $15,000 and joint filers earning less than $25,000 received the full $3,200 credit for a child younger than 6 and $2,400 for a child ages 6 to 16. The credit phased out for single filers earning up to $85,000 and joint filers earning up to $95,000. Eligible families received an average FATC of $2,862.
The credit was designed to meet families where they are, putting real cash back into household budgets.
FATC: In Just One Year
An evaluation by the Family Economic Policy Lab at the Center for Development found that in its first year, the FATC:
Importantly, one-third of eligible filers did not receive the credit because they were unaware of it, meaning the FATC had the potential to reach even more families.
When layered with Colorado’s other tax credits, the FATC helped drive the state’s child poverty rate to the lowest in the nation. On its own, the FATC reduced child poverty by about 20%. Combined with other credits, the overall reduction reached approximately 37%.
In just one year, the policy worked.
How H.R. 1 Changed the Equation
H.R. 1 prioritized corporate and high-income tax cuts while destabilizing federal revenues. Because Colorado’s tax system conforms to federal law, those changes reverberated at the state level.
The combined impact of H.R. 1’s policies increases tax rates for all Americans except the top 5% of earners, defined as those making more than $361,000 per year. The richest 1%, those earning more than $917,000, are set to receive $117 billion in tax cuts this year, averaging $66,000 per household. That group receives 72% of all tax cuts.
Major corporations, including Amazon, Alphabet, Meta and Tesla, are projected to collectively receive $51 billion in tax breaks in 2025. Tesla paid $0 in federal income taxes on $5.6 billion in income in a recent year.
Meanwhile, the bottom 70% of earners are expected to be worse off. The lowest 10% will see an average income decrease of about $2,160. The lowest 20% face a 3.1% increase in their effective tax rate, even as the highest-income earners benefit from new deductions and breaks.
The ripple effect is clear: federal tax cuts for the wealthy reduce overall revenues, shrinking the resources available to states and threatening programs like the FATC. As a result, more than 300,000 Colorado families will lose access to this credit this year.
Where Do We Go From Here?
We must continue advocating for a fair tax code, one in which corporations and the highest-income earners pay their fair share and working families are not left behind. Policies should strengthen economic security, not undermine it.
This legislative session, lawmakers are advancing a package of four bills designed to separate Colorado’s tax code from harmful federal changes and generate revenue to fund a permanent Family Affordability Tax Credit for lower- and middle-income families. The package would curb excessive tax breaks for millionaire executive salaries, decouple from certain federal corporate giveaways, modernize sales tax rules for downloadable software and clean up ineffective deductions in the tax code. Together, these measures would rebalance the tax code so that working families are prioritized over special interests.
Colorado does not have to fund tax cuts for those at the top at the expense of families who are simply trying to keep up with rising costs. We can choose a different path. Visit our legislative page to learn more about the four-bill package and find ways you can support these bills as they move through the Legislature. A proven child poverty tool should not be temporary. It should be permanent in Colorado
Second from left, Lelia Hobley, a Denver mother of three, prepares to speak at a Feb. 17 press conference supporting legislation to separate Colorado’s tax code from federal changes under H.R. 1 and fund a new child tax credit. She says the previous credit gave her reliable transportation, breathing room in her budget, and support for her children’s activities.
