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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.
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
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.
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.
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:
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