Tuition program contribution for CO has this blurb:"....Your contribution must be included in your federal taxable income." I am deducting contribution not income?

[taiyed201]

When entering the amount I contributed for the year to a 529 in CO, I see that blurb.  For one its in the "Income" section of state return not deductions.  Its not income its money I put towards the CO 529.  Anyone else come across this question from CO?

[DavidS127]

TurboTax is showing this message because the 529 plan contribution is not deductible on the federal tax return, but is deductible on your Colorado state tax return "to the extent they are included in federal taxable income" (CO tax language).

Your 529 plan contribution should show up as an "income subtraction" on your CO tax return.

[taiyed201]

Thanks @DavidS127 .  The language  "extent they are included in your federal taxable income" is still not clear. 

Lets look at an example where I contribute  $5000 to my child's CO 529 in 2019. 

What is clear to me:

• I am able to take an income subtraction of $5000 on only my CO state tax return and not federal.

Based on the TT sentence in the state return where you enter 529 contributions on federal income, what is not clear:

• Do I need to do anything else on my federal income tax return in the income section for 2019 regarding that $5000 contribution?  

I get 529 contributions are not eligible for federal income deduction, but the way the sentence is written it sounds like the $5000 needs to be included in your federal taxable income for your 2019 tax return..which to me does not make any sense all.  Which it probably isn't.   If all they are talking about is it has to be after tax income, e.g. income you have that was taxed previously like your salary, etc. than I get it...but TT does not make it clear.    

[DaveF1006]

the wording may be confusing but there is no way that your $5000 contribution would be reported as taxable income in your return.  Now if that contribution is treated as distribution, then it could under the right circumstances be reported as taxable income. As far as i know, you would not report your contribution in your federal tax return.