Colorado Credit For Tax Paid to Another State--General, Part-Year Residents and Nonresidents
If you have income that was earned and is taxable in another state, but was received while you were a resident of Colorado, this income is taxed in both states. To prevent this income from being taxed twice, a credit is available for tax paid to that other state.
It is important to note that the income is properly taxed by Colorado if it is received while you are a Colorado resident. This credit is not meant to eliminate taxation of this income by Colorado. It merely prevents the double taxation of the income and the credit will generally be equal to the tax of the state with the lowest tax rate. Therefore, if the income is earned in a state that does not have a state income tax, the income is taxable in Colorado and no credit is available.
The credit is available for taxes paid to other states, the District of Columbia, and territories or possessions of the United States. It is not available for taxes paid to other countries.
The credit is computed on Form 104CR, which must be attached to the Colorado income tax return along with a copy of the tax return from the other state when the credit is claimed.
A nonresident of Colorado will never claim a credit for tax paid to another state in Colorado. They may be eligible for a similar credit in their state of residency.
A part-year resident will generally not claim the credit for tax paid to another state since their income is usually taxed only by the state of residency when the income is earned. However, if income is earned from sources in the other state while the taxpayer is a Colorado resident, then it may be taxed by both states. If this is the case the tax credit can be claimed. The computation of the credit for taxes paid to another state by a part-year resident is more complicated than it is for a full-year resident and the different computations are explained below. OnLine Taxes will automatically compute this credit for you based on the information you provide.