The Colorado 2021 Individual Income Tax Return starts with the 1040 Federal tax return line 15. The sale of the rental property should be included in this figure whether that sale resulted in a gain or loss.
In the Colorado state tax return software, are you referring to the screen Colorado Net Capital Asset Income? Perhaps your sale does not qualify for this exclusion and that is the source of the 'large amount to the state of Colorado'?
You may qualify to subtract certain capital gain income for Colorado if either of the following are true. Check the boxes that apply to the capital gain income included on your federal return.
I sold property for which all the following are true:
- The gain must be included in the qualified taxpayer's federal taxable income for the year of the subtraction.
- The property was real or tangible personal property located within Colorado.
- You owned it for at least five uninterrupted years prior to the sale.
- You acquired it on or after May 9, 1994, but before June 4, 2009.
- The transaction that resulted in the gain occurred during a tax year beginning after January 1, 2010.
I sold property for which all the following are true:
- The gain must be included in the qualified taxpayer's federal taxable income for the year of the subtraction.
- The property was tangible personal property located within or outside Colorado.
- You owned it for at least five uninterrupted years prior to the sale.
- You acquired it on or after June 4, 2009.
- The transaction that resulted in the gain occurred during a tax year beginning after January 1, 2010.
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