TurboTax Deluxe incorrect state income for Colorado

[rajkej]

I am using TurboTax Deluxe desktop Windows version 025.000.0232 with Federal and State of Colorado. My Federal AGI form 1040 line 15 is $N and the State form 104 line 1 shows $N+21. The instructions for Colorado Form 104 state line 1 is federal taxable income from form 1040 line 15. Therefore, I believe the state form should be showing $N as state taxable income.

This may be related to the AGI versus Standard deduction on form 1040. Line 11b on my 1040 shows an amount $X. Line 12e standard deduction shows an amount $X - 21. I have overtime deductions in addition. My amount $X is less than the filing status standard deduction allowed. I chose the standard deduction, so it is unclear to me why line 12e doesn't reflect the total deduction allowed. In either case, the state line 1 should match the federal line 15 and that is not happening.

[MarilynG1]

Colorado does not allow the federal tax deduction for overtime pay (the "overtime credit" from the OBBBA). Effective for tax years 2025–2028, Colorado House Bill 1296 requires taxpayers to add back any overtime compensation excluded from federal income to their Colorado taxable income. 

• No State Tax Break: While the federal government may exempt certain overtime pay from income taxes, Colorado taxpayers must report the amount deducted federally and add it back for state income tax purposes.
• Continued Taxing: Colorado explicitly opted to continue taxing all overtime income, unlike some other states, although they do allow the "No Tax on Tips" provision. 
• Effective Date: This requirement is active, with specific reporting requirements beginning for the 2025 tax year. 

In summary, for state income tax purposes in Colorado, overtime is taxed normally, regardless of the federal exemption.  Here's more info on Colorado Overtime. 

@rajkej 

[rajkej]

@MarilynG1 , thank you for your response.

It was my understanding that the bill mentioned HB25-1296 was signed into effect in 2025 but for overtime pay does not take effect until tax year beginning January 1, 2026. I now see conflicting references online in that regard. I will assume that Intuit has validated this and the change is correct.