Working Past 65? Colorado Might Finally Give You This Tax Break.

What This Bill Actually Does

Under current tax law, there is a weird quirk: if you are a low- or moderate-income worker without qualifying children at home, you get aged out of the Earned Income Tax Credit (EITC) the moment you hit 65. The federal government temporarily removed this cap back in 2021 during the pandemic, but those rules expired. Colorado previously updated its laws to make the lowered minimum age permanent for younger workers, but left older workers out in the cold. HB26-1240 is designed to fix that disparity once and for all.

Starting on January 1, 2028, this bill permanently eliminates the maximum age limit for Colorado's state-level EITC. The legislative declaration points out a hard truth: a lot of Coloradans over 65 are still in the workforce out of pure financial necessity. They are helping to sustain local economies and multigenerational households. Yet, they don't get the same tax rewards for working as a 40-year-old with the exact same income and job.

Mechanically, the bill creates a clever workaround. Since the federal government still has the age cap in place, Colorado will calculate your state credit based on what your federal credit would have been if the 2021 American Rescue Plan rules were still active. By default, you'll get 25% of that hypothetical federal amount, though the bill also bakes in mechanisms that can increase that percentage if state revenues hit certain triggers in the future. Bottom line: it treats older workers exactly like younger workers when tax season rolls around.

What It Means for You

If you're a working senior, or if you're helping aging parents navigate their finances, this is a big deal for your wallet. The Earned Income Tax Credit is one of the most effective tools we have for reducing poverty, literally putting cash back into the pockets of people who are working hard but not making a fortune. Right now, turning 65 means you lose this benefit. If this bill passes, you'll be able to claim it again starting in the 2028 tax year (which you'll file in early 2029).

For younger professionals and parents, this might not hit your wallet directly right now, but it's a critical safety net for the broader community. Many households rely on grandparents who are still pulling shifts to help make ends meet. Allowing them to keep more of what they earn eases the financial pressure on the entire family tree. Just keep in mind the timeline—this isn't an immediate fix for next April's tax return; the state is giving itself a couple of years to prepare before the financial impact kicks in.

What you can do right now:

• Call your state representative: Let them know if you support ending the EITC age cap. Since it's currently in the House Finance committee, reaching out to committee members carries extra weight.
• Review your family's tax strategy: If you have older relatives working part-time, keep this 2028 change on your radar. You want to make sure they know to claim the EITC so they don't leave perfectly good money on the table when the time comes.

What It Means for Your Business

As a Colorado employer, you might be thinking this is strictly a personal tax issue that doesn't affect your bottom line. But if you run a business in retail, hospitality, food service, healthcare, or any industry that relies heavily on part-time, hourly, or older workers, this legislation actually works heavily in your favor. The Earned Income Tax Credit essentially acts as a wage subsidy. When the state boosts the take-home pay of your lower-income employees through tax credits, it increases workforce participation without forcing you to drastically hike your base wages to keep people afloat.

Older workers are an increasingly vital part of the labor pool right now, especially as we deal with ongoing staffing shortages in service and administrative sectors. By removing the tax penalty for working past 65, HB26-1240 gives seniors a very real financial incentive to stay in the workforce or pick up extra shifts. It also means more disposable income flowing directly into local communities, which translates to everyday spending at your restaurants, shops, and service centers.

From a compliance standpoint, you can breathe easy: there is absolutely no extra paperwork for your HR or payroll departments. The EITC is claimed by the employee on their individual tax return, not managed through your payroll withholding. You get the benefit of a more incentivized workforce without the administrative headache.

Action items for business owners THIS WEEK:

• Inform your workforce: If you employ seniors, let them know this legislation is moving. Being a helpful resource on tax benefits builds incredible employee loyalty and trust.
• Watch the effective date: Remember, this takes effect for the 2028 tax year. You don't need to change anything today, but it's a great data point for your long-term staffing and retention strategy.

Follow the Money

We don't have the official Legislative Council Staff Fiscal Note for this exact bill just yet, but the fundamental mechanics of how EITC expansions affect state coffers are well known. By expanding the pool of eligible EITC recipients to include everyone over 65, the state is going to see a reduction in General Fund revenue. EITC is a fully refundable credit—meaning if the credit drops a worker's tax liability below zero, the state literally cuts them a check for the difference.

The bill's sponsors explicitly call this a "modest and responsible fiscal investment," and they deliberately delayed the effective date to January 1, 2028, to give the state time to budget for the impact. Because EITC expansion comes out of state income tax collections, it typically reduces the total amount of money subject to TABOR refunds in years when the state collects revenue over the constitutional cap. In short: it shifts money from the general state revenue pool (and potential blanket taxpayer refunds) directly into the pockets of lower-income working seniors.

Where This Bill Stands

HB26-1240 is fresh out of the gate. It was introduced in the House on February 18, 2026, by Democratic Representatives Manny Rutinel and Yara Zokaie. Right now, it doesn't have a Senate sponsor listed, which is totally normal for this early stage in the session.

The bill has been assigned to the House Finance Committee. Because it deals directly with tax credits and state revenue, it will need to pass through Finance before almost certainly being routed to the Appropriations Committee to account for the financial impact. EITC expansions usually have strong, unified support from poverty-reduction advocates and Democrats. The delayed 2028 start date suggests the sponsors are trying to make the budget math easier for fiscal hawks to swallow, which improves its chances. Keep an eye out for the first committee hearing schedule in the coming weeks.