What is the pension and annuity income exclusion on Colorado state tax return? I don't know how this affects me.

[deinbeck]

I don't know how much of my RMD qualifies for the

pension and annuity income exclusion.

How do I find out?

[MaryK1]

Up to $24,000 of your RMD  can be subtracted from your Colorado income if it qualifies as annuity/pension. TurboTax calculates the amount in the Colorado state tax section.

If you meet certain qualifications, you can subtract some or all of your pension and annuity income on your Colorado individual income tax return (Form 104). You must be at least 55 years of age unless you receive pension/annuity income as a death benefit. You can claim the subtraction only for pension/annuity income that is included in your federal taxable income in the year you claim the subtraction.

FYI Income 25

[ALAN1220]

I am a bit confused with this exclusion.  The 2019 TurboTax Premier Program claims all of our joint Social Security Benefits as an Exclusion on our Colorado Return and will not allow me to adjust it to $24,000.  Our combined SS Benefit is over $31,000.  Is all of our combined SS Benefit excluded from taxable income on our state return because we are over 65? 

[JohnB5677]

In Colorado, Social Security benefits that are not taxed by the federal government are not added back to adjusted gross income for state income tax purposes.   

Those 65 and over can exclude up to $24,000 of Social Security benefits and qualified retirement income.  

So it's quite possible none of your Social Security benefits are taxable in Colorado.

[RosieP]

I'm not a CPA and this is my first time using TurboTax. I'm using the 2019 Premier version. As I understand the Colorado Pension & Annuity Exclusion, each individual can exempt up to $24,000 per year on his/her Colorado State return for retirement income such as IRA distributions and Social Security benefits. For married couples, each can exempt up to $24,000, for a total of $48,000 per couple.

So my layperson answer to your question, Alan1220, is that I believe that your combined SS benefit is excluded from taxable state income in Colorado.

I wonder if there's a bug in the program, however. I personally received around $45,000 and my spouse received $14,000. I entered this clearly (indicating everything by name). TurboTax is giving us a $48,000 exemption, and that doesn't seem right to me. 

Am I right, or is TurboTax?

[KatrinaB48]

You have received the maximum amount of pension and annuity subtraction available in 2019. Your combined social security benefits are not excluded from your Colorado state income. Only social security retirement benefits included in federal taxable income qualify for the pension and annuity subtraction. According to the Colorado revenue page, the amount of subtraction is computed separately for each spouse. If a taxpayer’s qualifying pension and annuity income exceed the maximum allowable amount, the excess income cannot be subtracted either by that taxpayer or their spouse, even if the amount of the spouse’s pension and annuity income is less than the maximum allowable subtraction amount.

[RosieP]

Re: "I wonder if there's a bug in the program, however. I personally received around $45,000 and my spouse received $14,000. I entered this clearly (indicating everything by name). TurboTax is giving us a $48,000 exemption, and that doesn't seem right to me. 

Am I right, or is TurboTax?"

As a follow-up to the above question, this was a user error (mine) in that I was not supposed to enter my and my husband's Social Security income on the "Other Pension and Annuity Income Exclusions" window. I think the user interface could be clearer here, to avoid this possible mistake, by stating clearly that previously entered Social Security income had already been taken into account. 

Anyway, as stated previously, for married couples, each can exempt up to $24,000, for a total of $48,000 per couple. But if one party has, say, $14,000 to exclude and the other party has $45,000, you cannot simply combine them to the maximum of $48,000 per couple. Instead, your combined exemption is $14,000 + $24,000, or $38,000.

[KatrinaB48]

That is correct as each spouse's subtraction amount is figured separately. 

[mex_man]

Not entirely true -- you can only claim $24k if you are 65 or older.  See https://tax.colorado.gov/retirees

[RosieP]

@mex_man 

Thanks for clarifying. My husband and I are over 65, so we qualify, but it's good to point that out.

[MDRCO]

Please clarify and/or guide.

I am following 2021 Step-by-Step guide for Colorado and struggling to understand the Social Security exclusion entries.

I find a "Pension and Annuity Worksheet" that shows significant taxable social security on 3a and an allowable exclusion for myself and my wife on line 6.

But in the Colorado "Pension and Annuity Income" fields, these amounts are not listed.  Turbotax entered a pension amount but NOT the taxable social security amount shown on line 6 of the worksheet.  Why?

Similarly, on the "Other Pension and Annuity Income Exclusions" (next step of the guided entry), the fields are both showing zero.  Why?

What is allowed, where do I enter them, and why doesn't Turbotax Colorado automatically handle this?

Are the amounts shown on the worksheet, line 6 wrong or  ????

Very confusing for me!!

[MDRCO]

Well......

It appears that Turbotax does include the SS exclusion, it just doesn't make it obvious during the step-by-step.  I had to progress to a summary page before I figured this out.

All good but the step-by-step guide was less than clear.

[mex_man]

Yes, that is part of the same problem I had.  The step-by-step guided interview is not clear or correct, but it seems to come out in the wash when you enter the qualifying data yourself into the interview answer fields.  To be sure, check your eligibility directly with the Colorado government website at https://tax.colorado.gov/retirees .