Colorado 50% Daycare Tax Credit

Colorado provides a 50% state tax credit for donations to qualified day care providers which includes Evergreen Christian Academy (ECA). (Colorado Department of Revenue Income 35: Child Care Contribution Credit)

The credit is for donations used by the day care but cannot be used to offset the donor’s tuition or direct expenses for providing daycare to the donor.

Because ECA is a not for profit and a qualified tax exempt charitable organization under the IRC 501(c), donations to ECA should qualify for both a charitable deduction and the 50% state tax credit. The charitable deduction and the state tax credit will reduce the after-tax cost of a donation to ECA provided the donor has sufficient Colorado and Federal taxable income.

Examples of the after-tax cost of a donation at $500 and $5000 follows:

$500 Donation

$500 – cash cost of donation

($250) – less cash value of Colorado 50% day care tax credit

($142) less cash value of charitable deduction donation on state and federal tax at 28.4% tax rate

$108 – after tax cost of donation

$5,000 Donation

$5,000 – cash cost of donation

($2,500) – less cash value of Colorado 50% day care tax credit

($1,420) less cash value of charitable deduction donation on state and federal tax at

28.4% tax rate

$1,080 – after tax cost of donation

Donors should consult their tax advisors in determining their eligibility for the tax credit and use of the charitable deductions. The tax rates used in the example assume a 24% federal tax rate plus a 4.4% Colorado tax rate. A donor’s tax rate will vary based on his or her taxable income.

Once a donation is made ECA will provide the tax form for you.