House Bill 26-013

This act provides tax relief to families with dependent children and workers who earn income through tips or gig-based employment. Beginning with tax year 2027, eligible taxpayers may claim a refundable state child tax credit for each qualifying child. The credit is $1,200 per child for households earning $75,000 or less, $800 per child for households earning between $75,000 and $150,000, and $400 per child for households earning between $150,000 and $200,000. Taxpayers with children under six receive an additional $300 per qualifying child, and income thresholds are doubled for married couples filing jointly.

This act makes the child tax credit fully refundable, allowing eligible families to receive its full value even when they have little or no state income tax liability. The credit supplements rather than replaces the federal child tax credit, and beginning in tax year 2029, its amounts and income thresholds must be adjusted annually for inflation. The Department of Revenue may also establish procedures allowing eligible taxpayers to receive part of the credit through periodic advance payments during the year.

This act also exempts up to $50,000 per taxpayer per year in qualifying tip and gig income from state income taxation, beginning with tax year 2027. The exemption applies to tips and income earned through personal services performed as an independent contractor or through platforms such as rideshare, delivery, freelance, and other on-demand services. Salaries, hourly wages, bonuses, employer-distributed service charges, passive investment income, and income improperly reclassified to avoid taxation do not qualify. Employers or platforms that knowingly reclassify wages to obtain the exemption may be required to repay avoided taxes and face additional penalties.

The Department must update tax forms, withholding information, and guidance and conduct public outreach concerning the new benefits. Beginning January 15, 2029, the Department must report annually for five years on the distribution of child tax credits, fiscal effects of the tip and gig income exemptions, worker-classification trends, poverty and household-income outcomes, and administrative costs. This act was approved April 8, 2026, and takes effect on August 18, 2026.