In The Know: Colorado’s Caring Workforce Tax Credit Is An Important Step Forward
The caring workforce, which includes caregivers for individuals across the lifespan, has far-reaching impacts on our broader economy. By enabling families to remain in the workforce and ensuring essential care for many, care workers foster thriving communities. Despite their critical role, care workers are underpaid, which has led to high turnover. To address these challenges, Colorado made a significant move in the 2024 legislative session with HB24-1312, the State Income Tax Credit for Careworkers.
What is the Care Worker Tax Credit?
HB24-1312 provides a refundable tax credit of $1,200 to eligible care workers. The credit can be claimed each year starting in the 2025 tax year through the 2028 tax year. To qualify, care workers must have worked in Colorado for at least 720 hours during the tax year in one of the following roles:
- Child Care worker, including Family, Friend, and Neighbor (FFN) child care
In addition, the care worker’s annual gross household income must be less than $75,000 for single filers, or $100,000 for joint filers.
What the Tax Credit Will Do
While this tax credit is not the complete solution to the challenges facing the care economy, it will boost the economic well-being of care workers, improve workforce retention, and enhance the quality of care provided.
Care worker wages are far below a self-sufficient wage or a housing wage in Colorado, as seen below.
The low wages make it difficult for care workers to support themselves financially. This is evident in the 42 percent of direct care workers in Colorado who rely on public assistance to make ends meet. In some cases, FFN caregivers may not even earn an income from providing care. A $1,200 tax credit will make a difference in caregivers’ lives by supporting their economic well-being.
Equally important, by improving financial stability, this tax credit is likely to reduce turnover. Lower turnover is essential for ensuring the accessibility of care and meeting the needs of Coloradans. Lower turnover also translates to more consistent caregiving which is crucial for maintaining the quality of care. For young children, stability supports social development, while for older adults, long-term caregivers are more likely to provide better care which can lead to better health outcomes.
HB24-1312 also sets an important precedent by financially supporting FFN caregivers, making Colorado the first state to include informal child care workers in such a tax credit. While other states have implemented similar tax credits for care workers, Colorado recognizes the vital role FFN care plays in our child care ecosystem.
Looking Forward
As previously mentioned, this tax credit will not be the single fix to the challenges faced in the care economy. Colorado needs to ensure living wages for care workers. However, HB24-1312 lays the groundwork for future improvements and support of the care economy, and recognizes the importance of care in Colorado’s collective well-being.
