Colorado Child Care Tax Incentives
Current for 2026 Tax Year • Last Updated: January 24, 2026
Strategic 45F stacking for Colorado employers and Small Business Coalitions
The 2026 Colorado "Stack"
Colorado employers have access to multiple state credits that can be combined with the federal Section 45F credit—but there are important restrictions to understand.
Claim a tax credit for 40% (Large Business) or 50% (Small Business) of qualified child care expenses, up to $600,000 annually.
50% Child Care Contribution Credit (CCCTC) for donations (up to $100K credit) + 20% Facility Investment Credit for equipment/property.
⚠️ Critical: Donation vs. Payment Distinction
The 50% Child Care Contribution Credit (CCCTC) is strictly for donations where you do NOT receive a direct benefit (quid pro quo).
The Trap: If you pay a center $150,000 in exchange for guaranteed spots for your employees, that is a business expense, NOT a donation.
The Consequence: Business expenses do NOT qualify for the 50% CCCTC. They only qualify for the standard business deduction and potentially the federal 45F credit. To get the 50% state credit, the money must be a "gift" with no direct strings attached.
⚠️ The "No Double Dip" Rule
You cannot claim a state tax credit AND a federal deduction/credit on the exact same dollar without adjusting your basis.
The Rule: If you receive a state tax credit for a charitable contribution (like the CCCTC), the IRS often requires you to reduce your federal charitable deduction by the amount of the state credit received.
The Impact: While you can technically "stack" credits, the IRS may view the 50% state credit as a "reimbursement," potentially reducing the eligible basis for the federal 45F credit. Claims of "90% covered" may overstate the net benefit after federal tax interactions. Consult a tax professional.
💡 Governor's Insight: The UPK "Wrap-Around" Strategy
Governor Polis has championed Universal Pre-K (UPK), which now covers 15-30 hours/week for 4-year-olds at no cost to families.
Smart Employer Strategy: Don't pay for what the state provides for free. Instead, use your 45F dollars to cover the "after-care" hours that UPK misses. This makes your child care benefit dollars go further.
💡 Colorado Strategy
Colorado's credits are real but require careful structuring. The 50% CCCTC only applies to true donations (no guaranteed spots). The 20% Facility Investment Credit applies to equipment purchases. Work with a tax professional to structure your child care investment correctly.
Colorado-Specific Examples
✅ Scenario A: True Donation (50% State Credit Applies)
A ski resort in Vail makes a charitable donation to a local non-profit child care center to expand capacity in the community. The resort does NOT receive guaranteed spots in return.
| Expense Category | Amount | Credits |
|---|---|---|
| Charitable Donation to Provider | $150,000 | $75,000 (State CCCTC 50%) |
| Federal Charitable Deduction* | $75,000 (reduced basis) | ~$18,750 tax savings (25% bracket) |
| Total | $150,000 | ~$93,750 in tax benefits |
*Federal deduction reduced by state credit amount per IRS rules. Actual benefit depends on tax bracket.
Note: This is a donation, not a business expense. The resort cannot claim the federal 45F credit on this amount because 45F is for business expenses, not charitable contributions. The benefit comes from the 50% state credit + reduced federal charitable deduction.
💼 Scenario B: Business Expense (Federal 45F Applies, NO 50% State Credit)
The same resort pays a licensed child care center to reserve guaranteed spots for employees' children.
| Expense Category | Amount | Credits |
|---|---|---|
| Child Care Subsidies (Guaranteed Spots) | $150,000 | $60,000 (Federal 45F 40%) |
| State CCCTC Credit | N/A | $0 (not a donation) |
| Equipment for Partner Facility | $25,000 | $5,000 (State 20% Facility Credit) |
| Total | $175,000 | $65,000 in credits |
🏔️ The Colorado Reality
When you're buying services (guaranteed spots), you get the federal 45F credit but NOT the 50% state donation credit. You can still claim the 20% Facility Investment Credit on equipment purchases. The "90% covered" claim only applies to true charitable donations with complex federal tax interactions.
Colorado Compliance & Resources
📋 Licensing Requirements
All child care facilities must be licensed by the Colorado Department of Early Childhood (CDEC). CDEC took over licensing from Human Services in 2022. This applies to both center-based and family child care homes.
CDEC Child Care Licensing →💼 Colorado State Credits
Colorado offers multiple employer child care credits, including the Child Care Contribution Credit and the Employer Child Care Facility Credit. These are administered by the Colorado Department of Revenue.
CO Department of Revenue →📄 Required Federal Form
File IRS Form 8882 with your federal business tax return to claim the Section 45F credit. Consult with a tax professional regarding Colorado's "conformity" to federal tax law changes for the 2026 tax year.
IRS Form 8882 →🤝 Local Support
Employers in Colorado can partner with local Early Childhood Councils to locate and vet qualified providers. These councils serve regions across the state.
Early Childhood Councils of CO →Colorado Child Care Landscape
Why Colorado Employers Are Investing in Child Care
Colorado's booming economy and tight labor market, especially in mountain and Front Range communities, make child care a critical business issue. With multiple state credits available to stack with the federal 45F, the financial case for employer-supported child care in Colorado is stronger than ever.
Employers in these major Colorado metros are leading the way in child care benefits:
- Denver Metro Area – Tech, healthcare, and professional services
- Colorado Springs – Defense, aerospace, and technology
- Boulder County – Tech, natural foods, and research
- Fort Collins – Tech, manufacturing, and education
- Mountain Resorts (e.g., Vail, Aspen) – Tourism and hospitality
- Pueblo – Manufacturing and healthcare
Qualified Intermediary Platforms for 45F
Under the One Big Beautiful Bill Act (OBBBA) 2026 updates, employers can now claim Section 45F credits for expenses paid to qualified intermediary service providers. These platforms help connect employees with licensed child care and manage benefits administration.
Child Care Marketplace Platforms
Technology platforms that connect employees with vetted, licensed child care providers. Expenses for subscription fees, matching services, and provider network access qualify under 45F.
Benefits Administration Services
Third-party administrators that manage employer child care benefits, including enrollment, provider payments, and compliance reporting. Administrative fees are now 45F-eligible.
Resource & Referral Agencies
Community-based organizations that help employees find quality child care. Contracts with R&R agencies qualify for the 10% referral credit component.
Child Care Subsidy Programs
Employer-funded subsidy programs that offset employee child care costs. Direct subsidies to employees for licensed care are fully eligible for the 40-50% credit.
Colorado Section 45F FAQ
Yes, Colorado has several. The most significant are the Child Care Contribution Credit (CCCTC) (50% of donations to a licensed provider, up to $100,000 credit on $200,000 donation) and the Employer Child Care Facility Investment Credit (20% of investments in tangible property like equipment and furniture). The CCCTC was extended through tax year 2027 by HB24-1004.
This is critical. The 50% CCCTC only applies to charitable donations where you do NOT receive a direct benefit. If you pay a center to guarantee spots for your employees, that's a business expense—it qualifies for the federal 45F credit but NOT the 50% state donation credit. To get the 50% state credit, the money must be a "gift" with no strings attached.
It's complicated. The 50% CCCTC is for donations, while 45F is for business expenses—these are different categories. If you make a charitable donation, you get the 50% state credit but typically cannot also claim 45F on that amount. If you pay for guaranteed spots (business expense), you get 45F but not the 50% CCCTC. Additionally, the IRS may require you to reduce your federal charitable deduction by the amount of state credit received. Consult a tax professional.
Governor Polis has championed Universal Pre-K, which now covers 15-30 hours/week for 4-year-olds at no cost to families. Smart employers don't pay for what the state provides for free—instead, they use their 45F dollars to cover the "after-care" hours that UPK misses. This makes your child care benefit dollars go further.
Yes! The enhanced Section 45F provisions allow small businesses (under $31M average annual gross receipts) to form coalitions and pool resources to contract with qualified child care providers. This is a great strategy for businesses in resort towns or other high-cost areas of Colorado.
To qualify for both federal and state credits, the child care provider must be licensed by the Colorado Department of Early Childhood (CDEC). CDEC took over licensing responsibilities from Human Services in 2022. This includes licensed child care centers and licensed family child care homes.
Ready to Calculate Your Colorado Savings?
Use our calculator to estimate your federal Section 45F credit. Select "Colorado" in the state dropdown to see state-specific guidance.