1) Colorado - that appears to be correct. The form is calculating the state tax on the ENTIRE federal income but then applying the percentage as calculated on Line 35 against that tax and says that percentage is the CO portion and forgets the rest.
2) Now, Michican is still a problem. You should NOT get a credit for tax paid to CO on CO income if MI is calculating tax on MI income only.
Please review the MI 1040 form. At the top left, Box 7b should be checked indicating you are filing married-joint. Box 8b - and I bet this is the problem - should be checked indicating you are non-residents; as I stated earlier, I do not see a way to tag one as a resident and one as a non-resident; the form simply is not set up that way. That should automatically create Schedule NR, eliminating your spouse's income from the calcuations and determining the tax based solely on your MI income. Review Schedule NR and then Line 18 should be zero.
It simply does not work correctly to state that you are both residents. If Line 8a is checked as a resident it will not calculate property. Under this approach the tax paid in CO becomes a credit in MI on Line 18. I tested this in TaxSlayer and can see it's not correct.
Let me know what you discover.
