problem with federal deduction add back on colorado return

[dwkinsey]

Even though i itemized on fed return the colorado return shows a add back of deductions.

How do I fix?

[JohnW152]

There's nothing to fix.  What you're seeing is required by Colorado law.

On line 2 of Form DR 0104, you're required to add back any state income tax deducted on Schedule A of your federal return, subject to certain limitations.  See Additions in the DR 104 Book. 

And, on line 4, you may be required to add back itemized or standard deductions over a certain amount if your federal adjusted gross income exceeded $300,000 in tax year 2023.  This provision is new for 2023.  See the instructions above.

[KB_CO]

JohnW,

I have a similar question.  After reviewing and walking through the steps shown in the DR104 instruction book I am concerned that this is not working properly.

Getting specific:

My addback for CO is shown as $1,957

Below are the calculations that I walked through using the instructions.  This data comes from my Schedule A

Line 1 $10,000

Line 2 $11,236

Line 3 $ 6,376

Line 4 $    201

Line 5 $        0

Line 6 $31,157

Line 7 $29,200

Line 8 $ 1,957

Line9 $         0

Line 9 says to enter the smaller of line 5 or line 8.  My line 5 is $0 so why is my addback the value of Line 8?

[AmyC]

I would like to take a deeper look at this. However, I need a diagnostic file which is a copy of your tax return that has all of your personal information removed. Please notify me by adding @AmyC to your response. Then, it can be moved on to an investigation team and you will not get an immediate response, as I see the issue.

You can send a token to me by following the directions below:

TurboTax Online:
Sign into your online account.
Locate the Tax Tools on the left-hand side of the screen. 
A drop-down will appear. Select Tools 
On the pop-up screen, click on “Share my file with agent.”
This will generate a message that a diagnostic file gets sanitized and transmitted to us.
Please provide the Token Number that was generated in the response.

TurboTax Desktop/Download Versions:
Open your return.
Click the Online tab in the black bar across the top of TurboTax and select “Send Tax File to Agent”
This will generate a message that a diagnostic copy will be created. Click on OK and the tax file will be sanitized and transmitted to us.
Please provide the Token Number that was generated in the response.

@KB_CO 

[KB_CO]

Hello Amy,

Sorry for the lag in reply.  I am not understanding the instructions you provided.

TurboTax Online:
Sign into your online account. - Are you suggesting an online tax filing account or simply accessing the account to FAQ and online community?
Locate the Tax Tools on the left-hand side of the screen. - Having logged into the online community/FAQ area I don't find "Tax Tools" of any drop down on the left-hand side of the screen.   As a result I can't follow the balance of your instructions.

A drop-down will appear. Select Tools 
On the pop-up screen, click on “Share my file with agent.”
This will generate a message that a diagnostic file gets sanitized and transmitted to us.
Please provide the Token Number that was generated in the response.

I have the diagnostic file generated from the desktop version of the software and the token number, but I don't find a way to send to you.

Advise.

[KB_CO]

@AmyC

Sorry for the lag in reply.  I am not understanding the instructions you provided.

TurboTax Online:
Sign into your online account. - Are you suggesting an online tax filing account or simply accessing the account to FAQ and online community?
Locate the Tax Tools on the left-hand side of the screen. - Having logged into the online community/FAQ area I don't find "Tax Tools" of any drop down on the left-hand side of the screen.   As a result I can't follow the balance of your instructions.

A drop-down will appear. Select Tools 
On the pop-up screen, click on “Share my file with agent.”
This will generate a message that a diagnostic file gets sanitized and transmitted to us.
Please provide the Token Number that was generated in the response.

I have the diagnostic file generated from the desktop version of the software and the token number, but I don't find a way to send to you.

Advise.

[AmyC]

Sorry! The directions were for both the online version and the desktop version to get the token. You just need to reply here with the 7 digit token you generated and be sure to @AmyC

[KB_CO]

@AmyC 

token 1223761

[KB_CO]

@AmyC 

Just sent you the token.  Also an item to keep in mind as you review the file.  For the CO state filing I spoke with a product person who tried to get me an answer.  At the end of the conversation I forced the correct answer into the worksheet.

As I stated in my initial post the program currently sums (local income tax (schd A line 5b) + state and local property tax (schd. A line 5c)) and substract that sum from the amount of the fed deduction (Schd. A 5e).  When you do that in my case the  you get $3,423.   The state form and the program then says compare the difference between the total itemized  (schd. A line 17) and the standard deduction I could have claimed (in my case 29,200) to the result of the difference between (Schd A 5b + 5c) - 5e.  In my case that difference for my itemized deduction minus the standard deduction is $1,957.  The state instruction says use the lower of the these two values.  Therefore, the program uses $1,957 versus $3,423. 

The problem is the program does not use all of the fields that the state instructs taxpayers to use.  The state form (revised February 2024) "Income Tax Topics: State Income Tax Addback" guides taxpayers to sum (Schd A line 5a + 5b + 5c) subtract from Schd A  5e.  When you do that, the value of my worksheet is -$7,813 or $0 (the state says enter the result but not less than 0).  If the program would compare $0 to $1,957, it should have entered $0 as the addback for the state of Colorado.  The $1,957 addback resulted in a roughly $80 reduction in my tax liability or increase in my refund. 

[DMarkM1]

TurboTax is calculating the CO addback correctly in accordance with the CO addback worksheet. The CO addback worksheet line 2 amount is only the "Local income tax deduction included on Schedule A, line 5a".  That amount is zero (0) in your scenario.  That makes line 5 on the worksheet $3423 and line 8 on the worksheet $1957.  The lower addback is $1957. 

@KB_CO

[KB_CO]

@DMarkM1 

Hi D,

Sorry but the program is not addressing the addback in accordance with the instructions found in the Colorado Income Tax Topics: State Income Tax Addback .  This document is revised as of February 2024.  In this document you will find that the state instructs tax payers to subtract the sum of 5a, 5b and 5c from 5e.   (See line 5 of the instruction) The program subtracts the sum of 5b and 5c from 5e.

I've already submitted my return following the instruction from the instructions provided by the state.  At this point, this issue is not about my return, but other users.  Best to you.

[DMarkM1]

Yes.  TurboTax is calculating the CO "Addback" correctly.  

Per CO Income Tax Topics:  State Income Tax Addbacks Revised February 2024 line 5 instruction reads: 

"5) Subtract lines (2), (3), and (4) from line (1). Enter the result, but not less than $0."

Line (2) instruction reads:  

"2) Enter any local income tax deduction included on IRS Form 1040, Schedule A, line 5a"

Line 2 does not include any state income tax deductions only local income tax deductions.  

Therefore, in your scenario line 2 will be zero, line 3 will be 6,376 and line 4 will be 201.  So the total of lines (2) (3) and (4) is 6577.  Subtract that from line (1) 10,000 yields $3423.

Compare to line 8 $1957 in your scenario and that results in an "Addback" of $1957.

Further,  page 1,   CO Income Tax Topics:  State Income Tax Addbacks Revised February 2024   reads:  

"Limit on state and local tax deduction:

For tax years 2018 through 2025, federal law limits the total amount of state and local taxes an individual may deduct on their federal return to $10,000. If a taxpayer’s total federal deduction for state and local taxes is limited to $10,000, the required addback is equal to the amount by which the $10,000 limit exceeds the sum of all state and local taxes, other than state income tax, for which a deduction was claimed on the Schedule A of the taxpayer’s federal return."

@KB_CO 

[joe_from_CO]

Hi @DMarkM1 ! 

Sorry to bug you on this again! 

I was just reviewing my TTax-generated Colorado taxes and noticed the "Federal Deduction addback (see instructions)" being 11,700. Last year I did my taxes through a tax preparer and it was 0, so I started Googling to see what that number is and found this thread. 
I've run the math according to the link you posted (https://tax.colorado.gov/sites/tax/files/documents/ITT_State_Income_Tax_Addback_Feb_2024.pdf) 
and from my math, the amount should be 0. 

I subtract 10000 - 141630 - 3779 - 302 and is clearly negative, so 0. 

Then Line 8  is (33 489 (itemized deductions) - 27 7000 (filling jointly) and I get 5789

Line 9 is the smallest of 5 (0) or 8 (5789), so it should be 0, yet I see 11700. 

[JohnWS]

See example B in the Colorado document you referenced. Line 2 there is LOCAL income tax only, not the state tax.  That results in somewhat different numbers. I don't understand how the end result is 11700, though.

[joe_from_CO]

Thanks!

I guess if it's only local, I get $5919, still not the 11K that TT calculated.