Colorado Charitable Contribution Subtraction

As we’ve discussed with many of you already, the 2020 CARES Act allows you to deduct up to $300 of charitable contributions on your federal tax return. What you may not know is Colorado taxpayers are allowed a charitable contribution deduction on their Colorado tax returns, as well. If you make charitable contributions and claim the standard deduction (rather than itemizing deductions) on your federal tax return, you may benefit from what is known as the Colorado Charitable Contribution Subtraction.*

The Charitable Contribution Subtraction allows you to deduct charitable contributions on your Colorado tax return. The first $500 of charitable contributions are not deductible; calculate the deduction by subtracting the first $500 of contributions from the total contributions for the year.

The following examples illustrate how to calculate the subtraction.

Example 1:

You contributed $400 to charities during 2019. You claim the standard deduction on your 2019 federal tax return. Even though you claimed the standard deduction, you cannot subtract your charitable contributions on your Colorado return because your total charitable contributions were less than $500.

Example 2:

In 2019, you contributed $2,000 to charities. You claim the standard deduction on your 2019 federal tax return. You are able to subtract $1,500 on your Colorado tax return ($2,000 – $500 = $1,500) as a charitable subtraction. Colorado has a flat tax rate of 4.63% so this $1,500 deduction would reduce your Colorado tax liability by $69 ($1,500 x 4.63% = $69).

Other facts to know about the Charitable Contribution Subtraction:

  • Both cash and non-cash contributions can qualify for the subtraction. Some limitations apply.
  • You must make contributions to a qualified charitable organization, as determined by the Internal Revenue Service. To determine if an organization is a qualified tax exempt organization, you can use this tool from the IRS’s website.

Detailed information about the Charitable Contribution Subtraction can be found in the Colorado FYI Publication Income 48.

If you have questions on whether this can benefit you, give us a call or contact your tax preparer.

*The CARES Act passed in March 2020 will allow taxpayers who claim the standard deduction on their federal tax return to deduct up to $300 of charitable contributions, beginning with the 2020 tax return filing. Colorado has not yet released guidance on how this will affect the Colorado charitable subtraction.