According to publication Income 21-Military Service Persons, "A person in the military service remains a resident of the state in which he/she resided at the time he/she entered the service unless he/she declares residency in another state. [Reg. 39-22-103 (8)] The serviceperson would declare residency in another state by changing his/her residency with the "Consolidated Base Personnel Office" or "Military Pay Office." Only the serviceperson’s home state may tax his/her 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 tax is figured.
If you are a nonresident stationed in Colorado, you are not taxed on the military income earned in Colorado. However, if any nonmilitary 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 are 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 and testament 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 you 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 the 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 amount of active duty military pay
- Save > Save > Exit Colorado Return
Military Retirement Benefits:
If you are 54 years of age or younger you may be able to exclude $10,000 or the total of military retirement benefits whichever is lesser. Persons between the ages of 55 and 64 may exclude up to $20,000 of the military benefit received for the year. Persons 65 or older may exclude up to $24,000 of the military benefit received for the year.
The program should automatically pull the pension amount. However, to make a manual entry,
- Colorado State Return (Resident)
- Subtractions from Income
- Pension/Annuity Income
- Enter the Colorado portion of Pensions and Annuities
- Save > Save > Exit Colorado Return
For additional information, see