Colorado residents will get income tax cut and TABOR refunds for 2024
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Colorado taxpayers will see the income tax rate fall to 4.25% for 2024 and receive TABOR refunds averaging $326 thanks to TABOR's limit on state revenue collections.
Why it matters: The windfall will put more money in people's pockets at a time of economic restraint, but lead to a deficit in the current state budget, according to a nonpartisan legislative forecast released Thursday.
State of play: The state must refund $1.7 billion in excess revenue in fiscal year 2023-24 to taxpayers when they file 2024 taxes next year.
- The size of the surplus triggers a new state law that reduces the income tax to 4.25% from the current rate of 4.4%.
- It also will lead to $1 billion in sales tax refunds ranging from $181-$571 depending on income levels.
Yes, but: The refunds will leave state lawmakers with less to spend on government programs.
- The discretionary spending in the current 2024-25 fiscal year is down 1.8% from the prior year — the second straight decline.
- Moreover, lawmakers are looking at a $371 million deficit because of state budget overspending and rising costs.
What we're watching: Don't expect such generous TABOR refunds in the future.
- Gov. Jared Polis and Democratic leaders approved new laws that divert surplus revenues toward child tax credits and an expanded earned income tax credit for low-income earners.
- Rather than give tax breaks to all Colorado residents, Democrats argued these targeted tax breaks benefit those who need it most.
By the numbers: The income tax rate is still expected to decline to 4.33% in 2026 and 2027, but TABOR refunds will significantly shrink by a collective $1 billion.
- In tax year 2025 — on taxes filed in 2026 — individuals will receive a $41 flat TABOR refund, and the risk of no TABOR refund is possible because of the new tax cuts.
The bottom line: Enjoy the lower taxes and extra cash when you file taxes in 2025 because it won't last.