Pension and annuity income exclusion on Colorado state tax return

[PB_Mich77]

Hello,

I'm using TurboTax Premium Do It Yourself Premium and it's not clear to me how to complete the inputs to my Colorado state tax return to ensure the pension and annuity income exclusion is factored into my return.  What are the steps I need to take or is TurboTax automatically completing this for me?  The documentation and other references I've reviewed are not clear.  Any guidance you can provide is greatly appreciated.  Thank yoi!

[BillM223]

Without knowing your particular circumstances, I would say that, generally, TurboTax handle such exclusions automatically.

However, you can help it happen by doing the following:

1. Make sure to indicate that you are a resident of Colorado (if you are) before you enter the 1099-R(s) for the pensions and annuities.

2. In the 1099-R interview, make sure you answer any Colorado questions about the source of the pensions/annuities. That is, make sure you go all the way through the 1099-R interview to make sure you haven't missed anything.

3. This process will work for most states (to handle exclusions automatically). However, a few states may have additional questions early in the state interview to be sure that they are handling these exclusions correctly.

At the end, if you have the Desktop product, look at your Colorado return to confirm that these items are excluded. If you are using the Online product, you won't be able to see the state forms until you pay for the product; however, if you have a fairly simple return, you may be able to use the state summary (which you can see by going to the left, and clicking on Tax Tools, then Tools, then View Tax Summary (make sure you are looking at the state summary)) to determine if your numbers make sense if the proper exclusions were done.

[PB_Mich77]

Hello,

Thanks for the reply.  Here is some more detail on my concerns/question.

1.  I did identify my wife and I as Colorado residents when inputting "My Information" at the start of the return.

2.  The Social Security benefits received during 2025, from the Forms SSA-1099 we both received, were entered in the Income section.

3.  We each received 1099-R forms for distributions from our respective IRA accounts and the annuities we each have.

Now, as I work through the menu structure for the Colo state return, I see the following:

"Here's the income that Colorado handles differently"

"Social Security and Pension Income Exclusion .....  $XX,XXX"

The next screen is "Social Security Income."

"Your pension exclusion so far is $0 and your total Social Security exclusion is $XX,XXX."  It is the $0 figure I am concerned about.

What do I enter on the next 2 screens to address the IRA distributions and annuity payments we received during 2025?

"IRA Distributions?" and

"Other Pension and Annuity Income Exclusions"

Can you provide some guidance on these 2 screens?

Hope this makes sense....  Would welcome the opportunity to talk directly....

Thank you!

How do I complete the next 

Next screen is 

[BillM223]

I would encourage you to read "Income Tax Topics: Social Security, Pensions and Annuities" on the state's website.

This reveals a complicated state of affairs: you have various limits for various ages and interaction of limits for the two spouses, and the effect of premature income, and so on. That's why it would be helpful for you to read the state's article in case anything jumps out at you.

That is, this article may help explain why you are showing $0 for your pension exclusion. Suppose, for example, you have a 1099-R with an amount that shows up on line 5a on your 1040 but no amount on line 5b (i.e., not taxable). As the state's article states, only taxable pensions can be excluded in Colorado.

Conversely, if the taxpayer is under 55, no exclusion is allowed, except as a death benefit.

I think you will find that TurboTax has correctly handled the situation, but I will need to know the details about a specific circumstance in order to discuss it in more detail.

And, no, they don't let us employees in the Community play with telephones.

[PB_Mich77]

Hello again!

I've followed your instructions and rechecked the interviews for Personal Information and the 1099-R's to ensure all information is complete and reflect the fact that we are Colorado residents.  

I'm using the Do-It-Yourself Premium online version of TurboTax through our relationship with Fidelity Investments.  When I follow your steps to review the State Tax Summary, it shows the Subtraction from Federal Income associated with only the Social Security benefits we both received during 2025. 

The IRA Distributions and Annuity payments we received in 2025 appears to have NO impact on the Subtraction from Federal Income line item on our CO State return.   I don't understand why this has no impact!  We are both older than 65 and I have found no details in all the documentation I've reviewed that these distributions should not be included in some way in the Subtraction from Federal Income calculation.  

Are there additional interview questions in TurboTax that I am missing where the specifics associated the IRA distributions and annuity payments are entered into the calculation?

Thank you!

[BillM223]

Are you using TurboTax Online or TurboTax Desktop?

If you are using the TurboTax Desktop product, you can go into Forms mode (upper right) and look for the Pens Excl Wks under Colorado (Pension Exclusion Worksheet). This will show you how the pension exclusion that appears on DR 0104AD line 4 is calculated. There is a kicker in that the the "allowable Social Security exclusion" is calculated. Since the actual deduction is the lesser of the sum of the various pensions and IRA distributions, and 24,000 (for you) less the allowable Social Security exclusion, the actual exclusion may not have any component of your IRA in it.

I will say that on my test, the 15,000 from the IRA distribution appeared both in the Step-by-Step interview as well as on the Pens Excl Wks, but it had no impact on the final exclusion.

If you have the Online product, then you won't be able to see this worksheet until you pay for the product.

If you want to pursue this with your real data, I suggest you call TurboTax Support where, with your permission, they will be able to view your screen and see your actual data.

[PB_Mich77]

Hello,

I am using the Online version of TurboTax.  I'll contact the TurboTax support group as you suggested.

Thanks for all your help and support!