EITC Earned Income Tax Credit And Child Tax Credit And Income Definition

The starting point for determining state income tax liability is federal taxable income. This number is adjusted for additions and subtractions that are used to determine Colorado taxable income, which amount is multiplied by the state's income tax rate. Section 3 of the bill requires an individual to add to his or her federal taxable income an amount equal to the federal income tax deduction that he or she took for his or her combined qualified business income amount. The federal deduction may be claimed for income tax years commencing prior to January 1, 2026. The earned income tax credit is equal to a percentage of the federal earned income tax credit. Section 4 increases the percentage from 10% to 20% beginning in 2021. The state child tax credit, which is also a percentage of the federal child tax credit based on the taxpayer's income, is only allowed after the United States Congress enacts a version of the "Marketplace Fairness Act". Section 5 repeals this condition and instead allows the credit to be claimed beginning in 2021.(Note: This summary applies to this bill as introduced.)