Yes, you must file a tax return in Colorado (CO) on the income received from farmland physically located there. Complete the CO return first, then do your resident return.
Income tax is prorated so that it is calculated only on income received in Colorado or from sources within Colorado. You will calculate your prorated tax by completing the DR 0104PN.
TurboTax will calculate it for you, watch the screens for an allocation page where you might need to enter the farmland rent.
CO Nonresident Filing Requirements
A nonresident is an individual who did not reside within the boundaries of Colorado at any time during the tax year. However, the person may have temporarily worked in Colorado and/or received income from a source in Colorado. A nonresident is required to file a Colorado income tax return if they:
- are required to file a federal income tax return, and
- had taxable Colorado-sourced income.
Nonresidents will initially determine their Colorado taxable income as though they are full-year residents. Then the tax will be prorated based on only the CO income.
The credit for taxes paid to another state on the same income is used on your resident state because they do not want you to pay taxes twice on the same income. As the resident state all worldwide income must be included.
The credit for tax paid to another state on the same income will be the lesser of:
- the tax liability actually charged by the nonresident state, OR
- the tax liability that would have been charged by your resident state
TurboTax should automatically enter this information if the CO return is done first. If not, write down the CO tax and the farmland income if you need to enter the information.
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