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State income tax credit for college tuition will cost Colorado $38M annually

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(The Center Square) – A refundable state income tax credit, estimated at reducing Colorado’s tax revenue by approximately $38 million, can now be used to pay for tuition and fees at Colorado’s higher education institutions.

House Bill 24-1430, signed into law by Gov. Jared Polis on Thursday, creates the tax credit to encourage Colorado high school graduates to enroll in the state’s higher education institutions. A student enrolled in a public state institution of higher education, community college, technical school or occupational educational school can receive the tax credit for income tax years 2025 through 2032.

The bill with amendments passed unanimously in the House on May 8, the last day of the 2024 legislative session, after passing 28-5 in the Senate earlier in the day.

For each tax year the student is claiming the credit, they must:

-have matriculated within two years after graduating from a Colorado high school or an equivalent program;

-have a household adjusted gross income of $90,000 or less as reported on their federal and state financial aid applications;

-qualify for in-state tuition;

-have enrolled in at least six credit hours or the equivalent for the semester or term they are claiming the tax credit and

-have a grade point average of 2.5 or higher for the semester or term for which they are claiming the credit.

“This will strengthen Colorado’s workforce, provide new pathways for students to gain in-demand skills and save Coloradans thousands of dollars – helping ensure that higher education is affordable for everyone,” Polis said in a statement.

The bill’s fiscal note stated the program is expected to decrease tax revenue to the general fund by $18.1 million in fiscal year 2024-2025, $36.7 million in fiscal year 2025-2026, $37.8 million in fiscal year 2026-2027 and similar amounts through fiscal year 2031-2032. The fiscal note, compiled by the state’s nonpartisan legislative council staff, estimated the average amount will be $2,700 for students at four-year colleges, $2,000 for students at area technical colleges and $1,000 for students at two-year colleges.

“It is important to note that the state revenue impact estimated above may vary based on several factors that can impact student enrollment and/or tuition and fees,” according to the fiscal note. “For example, the amount of state funding to higher education institutions will have a direct effect on the revenue impact. The fiscal note does not account for any increase in enrollment as a result of the credit.”

Students can only claim a maximum total of 65 credit hours during all years for their claim for the tax credit. Any scholarships or grants must be subtracted from the total tuition and fees eligible for the tax credit.

The law also requires the Department of Higher Education to provide to the Department of Revenue a report showing eligible students for the credit by Jan. 31, 2026 and each year thereafter. The Department of Higher Education also must submit a report on the program to the Joint Budget Committee, the House and the Senate Education Committee by June 30, 2027 and each year thereafter until 2037.

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