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Military Service Members -- Special Filing Information
Tax deduction available beginning tax year 2016
House Bill 15-1181 allows a person on active duty in the military who reacquires Colorado residency to receive a tax deduction from his or her state taxable income. The person's military home of record must be Colorado and he or she must have changed his or her state of legal residence to Colorado after
January 1, 2016
, in order to be eligible for the deduction. Individuals who qualify for the tax deduction under the bill may claim an exemption from Colorado withholding taxes. If his or her only source of income is military income, the service member is not required to file a Colorado income tax return.
Military retirement benefits taxable in Colorado
The rules for the taxability of military retirement benefits are the same as the rules for any retirement pension and annuity income. Persons who were 55 to 64 years of age as of December 31 may exclude up to $20,000 of their military retirement benefits received during the calendar year. Persons who were 65 years of age or older as of December 31, may exclude up to $24,000 of their military retirement benefits received during the calendar year.
Military serving outside of the U.S. for 305 days or more
A service member who is a full-year Colorado resident who spends at least 305 days of the tax year outside of the 50-state boundary of the United States while stationed outside of the United States for active military duty may file as a nonresident on the Colorado income tax return. The service member’s spouse may also file as a nonresident if the spouse accompanies the service member outside of the country for at least 305 days of the tax year while they are stationed there on active military duty.
Service member serving in a combat zone
Active duty pay earned in a combat zone that qualifies for the federal tax exemption is not subject to Colorado income tax. However, to the extent income is included in federal taxable income, Colorado tax will also be due on the income. Colorado law allows military and support personnel stationed in a combat zone, as declared by the President, to postpone filing and paying state income taxes until 180 days after their assignment in the combat zone ends. Interest and penalty are deferred during this period. Because most Colorado taxpayers receive a refund, affected taxpayers may want to plan ahead to authorize someone else to file their income tax return for them using a
Power of Attorney Form (DR 0145)
. If the return is filed under this 180 day extension, write the name of the applicable combat zone across the top of the Colorado Form 104.
Income tax modification for Military Family Relief Fund grants
This establishes a deduction from taxable income for military families receiving a grant from the Military Family Relief Fund. The total amount of the grant received by a family is deductible from the taxable income reported on and transferred from the taxpayer’s federal form, assuming the grant was reported as income.
The deduction takes effect for tax year 2014 and subsequent tax years.
Federal Military Spouse Residency Relief Act
For tax years beginning on or after January 1, 2009, wages and tips of a qualifying nonresident spouse are not taxable in Colorado and should not be included on
Part-Year/Nonresident Computation (104PN)
. A qualifying spouse must have moved to Colorado from another state, be in Colorado solely to accompany their active duty service member spouse who is stationed in Colorado in accordance with military orders, AND have the same state of residency as the home of record of the service member. A qualifying spouse who claims exempt wages and tips must submit
Exemption from Withholding for a Qualifying Spouse of a U.S. Armed Forces Servicemember (DR 1059)
to their employer and submit a copy of the DR 1059 along with their military ID card when filing the Colorado income tax return. A qualifying spouse may also be required to provide proof of qualification including, but not limited to, permanent change of station documentation, prior state filing history and tax returns, voter registration, and driver license of the other state.
Resident service member
A serviceperson who is a Colorado full-year resident is taxed in the same manner as any other Colorado resident. Colorado resident service member are those who are Colorado residents when they enter the service or those who are from another state and who choose to become Colorado residents.
Nonresident service member
A nonresident service member is not required to report his/her military income to Colorado. However, if the service member earned nonmilitary Colorado income, this income must be reported to Colorado for income tax purposes. The service member must pay Colorado tax on the following: nonmilitary Colorado salaries, nonmilitary Colorado wages, nonmilitary Colorado tips, nonmilitary Colorado commissions, income from a Colorado business, income from rents, royalties and/or gains from the sale of tangible personal property or real property located in Colorado.
The Colorado income tax filing status (joint or separate) must match the status used for federal income tax filing purposes. For example, if a taxpayer and spouse filed a joint federal return, they must file a joint Colorado return. If a taxpayer and spouse filed separate federal returns, they must file separate Colorado returns.
Sign income tax return for spouse/child out of the country on military orders
In order for a spouse or parent to file and sign an income tax return for a taxpayer who is out of the country, that taxpayer must have authorized someone else to file their return for them through a
power of attorney, DR 0145
. The military power of attorney form cannot be accepted for income tax purposes.