According to publication Income 21-Military Service Persons, "A person in the military service remains a resident of the state in which they resided at the time they entered the service unless they declare residency in another state. [Reg. 39-22-103 (8)] The serviceperson would declare residency in another state by changing their residency with the "Consolidated Base Personnel Office" or "Military Pay Office." Only the serviceperson’s home state may tax their military income. Every serviceperson must have a home state."
If you are a resident of Colorado, you are taxed the same as any other Colorado resident. Active-duty military pay is included in the Colorado Adjusted Gross Income when taxes are figured.
If you are a nonresident stationed in Colorado, you are not taxed on the military income earned in Colorado. However, if any non-military Colorado-sourced income was earned, this income must be reported to Colorado for income tax purposes.
If one spouse is a resident of Colorado and the other is not, the filing status on the Colorado return must match the filing status on the federal return. If a joint return was filed federally, a joint return must also be filed for Colorado. Use the nonresident or part-year resident tax computation rules for Form 104PN.
Colorado Active Duty HOME/Reacquisition Subtraction:
According to FYI 21 Military Service Members, "Beginning on or after January 1, 2016, an active duty serviceperson whose home of record is Colorado and whose state of legal residency is any state other than Colorado may reacquire legal residence in Colorado if at least one of the following five criteria is met. "Home of Record" is the place one was living when they entered or re-enlisted in the military.
- Register to vote in Colorado
- Purchase residential property or an unimproved residential lot in Colorado
- Title and register a motor vehicle in the state
- Notify the state of the individual’s previous legal residence and the intent to make Colorado the individual’s state of legal residence, or
- Prepare a new last will that indicates Colorado as the individual’s state of legal residence."
For the tax year beginning January 1, 2016, an active-duty military member who has reacquired residency in Colorado may claim a subtraction on the Colorado individual income tax return for the amount of active-duty military pay received, to the extent that the pay is included in federal taxable income. To enter the subtraction in the program (if you have reacquired residency), follow these steps:
- Colorado State Return (Resident)
- Subtractions from Income
- Reacquisition of Colorado Residency During Active Duty Military Service Subtraction
- Enter the amount of active duty military pay, then press continue to save the entry to your return
Military Retirement Benefits:
If you are 54 years of age or younger, you may be able to exclude $15,000 or the total of military retirement benefits, whichever is less.
The program should automatically pull the pension amount. However, to make a manual entry, please follow this program pathway:
- Colorado State Return (Resident)
- Subtractions from Income
- Military Retirement Benefits (under age 55)
- Enter the subtraction amount, then press continue to save the information to your return