The Colorado individual income tax return Form 104 enables recipients of certain pension benefits to exclude from their Colorado taxable income portions of their benefits for which they previously paid Colorado income tax. [C.R.S. 39-22-104(4)(c)]. If you receive pension benefits, you might be able to use this subtraction if:
- You made employee contributions to the Public Employees Retirement Association (PERA) any time between July 1, 1984 and December 31, 1986 and you are receiving PERA benefits during the current tax year.
- Or, you made employee contributions to the Denver Public Schools Employees Pension and Benefit Association any time between January 1, 1986 and December 31, 1986 and you are receiving benefits from this Association during the current tax year.
These contributions were subject to state income tax in the years they were paid, but were tax-deferred for federal income tax purposes. This means you must pay federal income tax when you receive benefit payments upon retirement or termination. The subtraction on your Colorado return enables you to subtract from taxable income the amount of pension benefits on which state income tax was already paid.
Note: If your total federally taxable pension income from all sources is less than $20,000 and you are 55-64 years of age, or if your federally taxable pension from all sources is less than $24,000 and you are 65 years of age or older, STOP! You will not need to use this subtraction because all of your pension income is fully excludable for Colorado income tax purposes under the regular $20,000/$24,000 pension subtraction.
The subtraction does not apply to you if:
- You began receiving PERA benefits before July 1, 1984 or Denver Public Schools benefits before January 1, 1986;
- Or, you excluded the total amount of your previously taxed contributions on Colorado income tax returns in prior years.
For more information, see FYI 16 on the Colorado website.