Why are Colorado residents receiving this money?
The legislature is opting to send taxpayers the money because of a record state surplus.
“Instead of the government sitting on money that Coloradans earned, we want to give everyone cash back as quickly and easily as possible to provide immediate relief and empower people to do what they want with their money,” Gov. Jared Polis said in a statement.
Colorado is returning funds to residents as part of its Taxpayer Bill of Rights, which limits how much revenue the state can keep and spend. The legislature also plans to use surplus funds to lower income taxes and issue a sales tax rebate in 2023.
How much money will Colorado residents receive?
Single filers will each receive $400, while joint filers will receive $800. About 3.1 million people are expected to receive the refund.
When will the money arrive?
Residents should get checks in the mail in August or September. You can contact the Colorado Department of Revenue if you have questions about your check.
Will you have to pay taxes on the money?
You’ll only pay taxes on the money if you deducted your state taxes on a prior year’s tax return. 99% of Colorado residents don’t itemize their deductions, so this is unlikely. If you’re one of the 1%, you’ll have to report the refund as income.
What should you do with the money?
One goal of the funds is to provide inflation relief, Polis said. So for many people, the money will go straight into their gas tank.
For people who won’t need the money as urgently, it’s a matter of priorities, says DeDe Jones, a certified financial planner and managing director of Innovative Financial in Lakewood, Colorado. Some people might want to use the money to shore up their reserve funds. Other people might gain more value from spending the money.
“The best thing to improve somebody’s life might be taking a weekend off just for your mental health,” Jones says.
If your financial foundation is well fortified, it’s OK to prioritize joy with this windfall, Jones says. Even if that means spending it all on drinks. If entertaining is a big part of your life, let your spending reflect that.
More from MediaFeed:
18 tips for beating inflation
Featured Image Credit: fizkes / istockphoto.