HMTC Program Guidelines

Program Purpose and Service Area

This program implements HB18-1267: Income Tax Credit for Retrofitting Homes for Health. This bill was enacted to implement a non-refundable tax credit: the Home Modification Tax Credit, formally recognized by the Colorado Department of Revenue as: Retrofitting a Residence to Increase a Residence's Visitability Credit. The Colorado Department of Local Affairs, Division of Housing is responsible for administering the Income Tax Credit for Retrofitting Homes for Health program, known as the Home Modification Tax Credit.

The Home Modification Tax Credit program allows state taxpaying Coloradans who either have a disability or impairment (or claim a dependent with one) to receive relief in the form of a state income tax credit of up to $5,000 to help alleviate costs incurred to modify their home to: improve accessibility; address health, welfare and safety needs; and install specialized plumbing or systems to complete medically necessary home modifications.

The Colorado Legislature passed clarifying legislation (HB19-1135, “Clarify Income Tax Credit for Retrofitting a Home”) to extend eligibility to all qualifying household members: spouses, children, and lifetime dependents. It also allows for up to a $5,000 credit per Qualified Individual with a disability or impairment.

This program has been extended through 2028, following enactment of SB-2023- 196, “Concerning an Extension of the Income Tax Credit for Retrofitting a Residence to Increase the Residence’s Visitability.” This is a statewide program, capped at one million dollars per tax year spanning 2019 through 2028.

The credit can be utilized for up to eight years from the tax year in which the home modification was completed, or until the amount of the credit is exhausted, whichever occurs first.

Program Administration

The Colorado Department of Local Affairs, Division of Housing, is responsible for administering the Home Modification Tax Credit program. The guidelines herein are thus enforced by the Division of Housing. If and when a tax credit certificate is issued, the Division of Housing has fulfilled all statutory obligations associated with the tax credit program and application process. Utilizing the tax credit certificate and receiving tax relief associated with this tax credit is under the jurisdiction of the Colorado Department of Revenue.

Eligibility Criteria for Qualified Individuals

A “Qualified Individual” is defined as either: 1) an applicant with a qualifying disability, 2) an applicant who claims a dependent child with a qualifying disability on their taxes, or 3) an applicant who claims a lifetime dependent with a qualifying disability on their taxes; as defined in sections 152(c) or 152(d), respectively, of the Internal Revenue Code.

A Qualified Individual must meet the following criteria:

• They, or their dependent, must have an illness, impairment or disability that necessitates the home modification; and
• Be a state income taxpayer; and
• They and their dependent (if applicable) reside at the residence that underwent the eligible retrofit/home modification at the time of application; and
• Have an adjusted household income at or below the limit according to the year in which the home modification was completed, which is:

The Division of Housing will use the Consumer Price Index for Denver-Aurora-Lakewood, CO to adjust the income limit for inflation each year. The Division of Housing will use the percent change in the index from the first half of the prior year to the first half of the current year to set the income limit for the next year.

Residence Eligibility Criteria

The residence being modified must:

• Exist before the work begins – the work may not be completed during initial construction of the residence; and
• Be occupied by the Qualified Individual and the dependent (if applicable) for whom the retrofit is needed at the time of application; and
• Be located in the State of Colorado.

Eligible Home Modifications/Retrofits

Retrofits to the residence must be for the direct benefit of the person with an eligible illness, impairment, or disability and meet the following criteria:

• Be necessary to ensure their health, welfare, and safety; and
• Increase the residence’s visitability; and
• Enable greater accessibility and independence in their home; and
• Be required due the person’s illness, impairment or disability; and
• Allow the person to age in place or remain living in a community setting; and
• Meet the Division of Housing Home Modification Construction Specifications.

Items that are not eligible for the Home Modification Tax Credit include but are not limited to: portable equipment, appliances, light fixtures, medical equipment, generators, solar power systems, and heating/cooling systems.

Eligible modifications must be installed or affixed to the residence. Work that is deemed general home repair/maintenance is not eligible for this program. Please contact the Division of Housing with any questions you may have about items that may or may not qualify.

Justification for Modifications

A licensed medical professional with knowledge of the person with an eligible illness, impairment or disability must determine and state in writing that the person:

• Has an illness, impairment or disability that necessitates the requested home modification; and
• How it is necessary to ensure their health, welfare and safety.

Application Process

The application process consists of three steps: Pre-Qualification Survey, Initial Application and Final Application. If the Pre-Qualification Survey determines that the applicant is a Qualified Individual, information on next steps will be provided via email. The Initial Application and Final Application are completed through an online portal: Division of Housing staff will set up login credentials within one full business day of completing the Pre-Qualification Survey. The prescribed process entails completing the application sequentially and proceeding to the next step of the process only after receiving approval from program staff to do so.

While the Division of Housing is willing to consider applications if a project is completed before submitting or receiving approval of the Initial Application, it is strongly advised that the prescribed process is followed. There is no guarantee that an application will be approved if the home modification was completed prior to submitting an application.

Applicants may submit their application materials at any time though the online portal. Paper applications are accepted if absolutely necessary under extenuating circumstances.

Applicants are welcome to apply with the assistance of a representative if they prefer. A representative is not eligible to receive the tax credit unless they meet the criteria of a Qualified Individual and submit a separate application. See Issuance and Utilization of Tax Credits below for more information on maximum allowable credits for multiple household members.

The Division of Housing will notify the Qualified Individual of their progress during each stage of the application process. If an application is deemed incomplete, specifics about missing documentation will be provided by program staff. An incomplete application is not a denial. Applicants are encouraged to contact program staff with any questions while gathering the additional information. If an application is complete, the merits of the request will be determined based upon the supporting documentation. Program staff may have additional questions before issuing a decision.

Pre-Qualification Survey

The Pre-Qualification Survey determines whether or not the applicant considers themselves a Qualified Individual. This is established by a series of yes/no questions. It does not require any supporting documentation. It is a basic online form that can be completed without login credentials. Successfully completing the survey does not guarantee that a tax credit will be issued.

Initial Application

The Initial Application requires the applicant to substantiate whether or not they are a Qualified Individual. This stage of the application provides an opportunity for the applicant to verify that they are eligible before starting the work. It consists of questions about the proposed project and submitting the following documentation:

• Verification of Income of all household members
  • If following the prescribed process: the most recent state income tax return must be submitted.
  • If applying retroactively, the tax return for the year in which the home modification project was completed must be submitted.
• Justification for Modification(s)
• Detailed Scope of Work
• Before pictures
• Proof of Ownership or Landlord Authorization:
  • Homeowners must submit property tax records.
  • Cohabitants must provide property tax records and a written statement from the homeowner approving the proposed work.
  • Renters must provide proof of lease and a written statement from the owner or property manager approving the proposed work, agreeing that the applicant is not responsible for removing the modification when they move; and agreeing to not utilize the applicant's security deposit to remove the modification.

Note: The Colorado Department of Revenue will re-verify the Qualified Individual’s family income based on their income tax filing. If the household income exceeds the limit, the Department of Revenue will not accept the tax credit certification.

Final Application

The Final Application consists of questions about the completed project plus the following documentation:

• After-pictures of the completed modification;
• Receipts for materials purchased and copies of invoices paid to another party;
• Proof of all required contractor licenses and building permits.

Applying Retroactively

A Qualified Individual may apply for the tax credit retroactively; however, there is no guarantee that the application will be approved. A retroactive application still requires the same documentation as outlined above. If the one million dollar allotment for the year in which the home modification was completed has been exhausted, the application will be denied. If applying retroactively, please consult with Division of Housing staff prior to proceeding with the application process.

Inspections

The Division of Housing will inspect a sampling of homes to ensure that eligible home modifications were completed as presented in the application and in accordance with the Division of Housing Home Modification Construction Specifications. A failed inspection may result in the applicant not receiving a tax credit until the work is corrected and the client updates their Final Application.

Issuance and Utilization of Tax Credit Certificates

The Division of Housing will issue tax credit certificates to approved applicants in the order in which complete final applications are approved. The Division of Housing will track the amount of credits issued for each tax year and stop accepting or approving applications once the one million dollar cap is reached.

Qualified individuals must submit the tax credit certificate with their tax return. The tax form DR 0104CR must also be completed in order to receive the credit. The applicable line item on form DR 0104CR for this tax credit program is: Retrofitting a Residence to Increase a Residence's Visitability Credit.

This specific tax credit is non-refundable, which means that the credit will reduce tax liability. The taxpayer may receive a refund on state taxes that were withheld throughout the tax year; however, the amount refunded is limited to what the taxpayer paid relative to the amount of the tax credit. Any amount of the tax credit issued that exceeds the Qualified Individual’s tax liability for the first year may be carried forward and used as a credit against subsequent years’ income taxes for up to eight years, or until the total amount of the credit is exhausted. The tax credit is not transferable to a different taxpayer.

A Qualified Individual is eligible for the lifetime maximum of $5,000. If an applicant has a disability but also claims a dependent with a disability, the lifetime maximum of the Qualified Individual remains capped at $5,000. If two Qualified Individuals file jointly, they are both eligible for the maximum credit each.

Subsequent Applications/Multi-Year Projects

The Home Modification Tax Credit program is limited to a lifetime maximum of $5,000 per Qualified Individual. A Qualified Individual is eligible to submit applications across multiple years until the $5,000 lifetime maximum credit is reached. If the cost of the retrofit is greater than $5,000, the lifetime maximum will be issued.

A Qualified Individual may choose to spread them out over time – for example, apply for and complete modifications based on one individual’s needs one year, then apply for and complete modifications based on another individual’s needs in a future year. A Qualified Individual may submit only one application per tax year. Subsequent applications for a tax year in which a credit was already issued will be denied.

Appeals Process

Applicants have the right to appeal the decision of the Colorado Department of Local Affairs/Division of Housing to deny a tax certificate. Requests for an appeal must be made in writing to the Division of Housing within 30 days of the date of the
denial notice. The Division of Housing will review the request in accordance with its Dispute Resolution Process.