What's Happening?
Colorado taxpayers will receive smaller TABOR refund checks in 2026, following a fiscal surplus of $296 million for the year ending June 30, 2025. The refunds, which are based on income, will range from $20 for single filers earning up to $56,000, to $62 for those earning at least $329,001. The reduction in refund amounts is attributed to the expansion of Colorado's Earned Income Tax Credit and the introduction of the Family Affordability Tax Credit, which will be paid out to tax filers in 2026. These changes mean less money is available for general refunds. Additionally, Homestead Property Tax refunds will consume nearly two-thirds of the surplus, benefiting older homeowners, disabled veterans, and gold star spouses.
Why It's Important?
The reduction in TABOR refund checks reflects a shift in Colorado's fiscal policy, prioritizing targeted tax credits over general refunds. This change is significant for lower-wage workers and families who will benefit from the expanded tax credits. However, it also means that general taxpayers will receive less in refunds, impacting their disposable income. The policy shift may influence public opinion on state fiscal management and could affect future legislative decisions regarding tax credits and refunds. Economists predict that Colorado will remain below the TABOR cap next fiscal year, potentially leading to no refunds, which could further impact taxpayer expectations and state revenue allocation.
What's Next?
State economists anticipate that Colorado will stay below the TABOR cap in the next fiscal year, marking the first time since the pandemic that no refunds may be issued. This forecast suggests a period of adjustment for taxpayers who have become accustomed to receiving refunds. The state will continue to monitor fiscal surpluses and adjust policies accordingly. Lawmakers may face pressure to reassess the balance between targeted tax credits and general refunds, especially if economic conditions change or if public demand for refunds increases.
