We bought our primary residence home in Colorado in 2008 & sold it in 2023. We do not owe federal capital gains tax, but do we still owe Colorado tax?

[rnmccandless]

According to the rules for the Taxpayer Relief Act of 1997, we meet all the guidelines to be exempt from federal tax. However, it's not clear to me if we're still liable for capital gains tax in Colorado.
The house did appreciate during this time. 
The house was our primary residence since we put it on sale in Oct 2022.
We closed on the house in Feb 2023.
We are a married couple, filing jointly, that bought another primary residence in another state in Oct 2022.

[DavidD66]

No.  You won't owe Colorado tax either.  While Colorado does have a capital gain tax on the sale of a residence, they have the same exclusion as federal tax.  If you lived in your house for two of the past five years you can excluded up to $250,000 ($500,000 if married filing joint) in gain on the sale of your house.  

[rnmccandless]

Thank you for the quick reply, @DavidD66. Do you have any sources for this information, such as any links to the colorado.gov website so that I can make sure I'm within the guidelines? 

Thank you,

Nick

[DianeW777]

Yes, both the Colorado (CO) capital gain deduction instruction and the CO instructions do not require any add back for the sale of a home.  CO starts with the federal taxable income and then they provide instructions on what must be added back and what items might reduce the CO taxable income.

• CAPITAL GAIN DEDUCTIONS
• CO Instruction Form DR 0104

@rnmccandless 

[vance4412]

I am in the same situation, and TurboTax is saying I have a Colorado State Tax underpayment because of the gains from the sale of property, shown in Colorado Portion of Gains and (Losses) page. I am not sure the expert's information is accurate given what TurboTax is saying I owe. If it is accurate, I would love to know how or why TurboTax isn't taking the exemption into account for the state return? 

From my research, the exemption is only applicable for farming or agricultural land after January 2022. 

[ThomasM125]

I could find no mention of adding back income associated with a sale of real estate in the instructions for Form DR 0104, Colorado Individual Income Tax Return. Instructions to Form DR 0104

I suggest you look at your tax summary for Colorado and see if the capital gain on your home sale is reflected in the summary. If so, let us know what line number it appears on so we can help you better. I entered a capital gain on sale of primary residence in TurboTax and then ran a Colorado return and the $150,000 gain is not reflected on the tax summary:

To view your state tax summary, enter into your state program and do the following:

1. Choose Tax Tools from your left menu bar in TurboTax Online
2. Choose Tools
3. Choose View Tax Summary
4. Choose the Back option in the left menu bar when you are done 

@vance4412 

[alexhenschel1]

Can someone please verify this. I don't think Colorado excludes capital gains on the sale of home. At least, I can't find it anywhere if it does.

[KeshaH]

Colorado has what's called "rolling conformity" with the Internal Revenue Code, which means the state automatically adopts and follows the Internal Revenue Code unless it specifically choose certain sections to not conform to. Income and expenses are calculated the same way for Colorado as they are for federal. Therefore, if you qualify for the federal exclusion of the gain on your primary residence you would not need to add it back to your Colorado return.

Cite: CO Revenue Statute Section 39-22-103(5.3)