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Category: Colorado

Colorado Additions to Income

STATE INCOME TAX DEDUCTION ADDBACK

Individuals who itemize deductions on their federal return, must add back on the Colorado return any state income tax included in their federal deductions. If you do not itemize deductions on your federal income tax return, you will not be required to add back your state income tax on your Colorado return. Additionally, you are not required to add back any real estate taxes or net disaster loss included in your total standard deduction.

If you did itemize deductions on your 2012 federal income tax return but deducted general sales taxes on line 5, schedule A, Form 1040, do not adjust the amount of State Income Tax Deduction. If you did itemize deductions on your 2012 federal income tax return and deducted CO income taxes on line 5, Schedule A, Form 1040, you must add back on your Colorado return any state income tax included in your federal itemized deductions.

***If your federal itemized deductions exceed the standard deduction you could have claimed by an amount that is less than the state tax deduction, you add back only the difference between the itemized and standard deduction amounts. Complete the following schedule to determine your state income tax deduction add back:

(a) State income tax deduction from line 5, Schedule A, federal Form 1040

(b) Total itemized deductions from line 29, Schedule A, federal Form 1040

(c) The amount of federal standard deduction you could have claimed (See line 40, federal Form 1040 for 2012 allowable federal standard deductions).

(d) Line (b) minus line (c), but not less than $0

Enter the smaller of line (a) or line (d) on “Adjust State Income Tax Deduction”. For most Colorado taxpayers who itemize deductions, the state income tax deduction add back will be the amount from line 5, Schedule A, Form 1040.

“OTHER ADDITIONS” TO FEDERAL TAXABLE INCOME

Bond Interest - The amount of any interest earned from bonds issued by any state or political subdivision, excluding any bonds issued by the State Colorado or its political subdivisions on or after May1, 1980. Calculate the appropriate amount by subtracting the amortization of bond premiums and expenses (required to be allocated to interest income by Internal Revenue Code) from the gross amount of state and local bond interest. If this applies to you, please see FYI Publication Income 52

Lump-Sum Distribution - Enter the amount of lump-sum distribution from a pension or profit sharing plan you reported on federal Form 4972. Because this income is not included in federal taxable income, these distributions must be added. The distribution should be reduced by any estate tax allocated to the distribution on Form 4972. Distributions included on this line are subject to 10-year averaging on the federal return. If the lump-sum distribution is not subject to 10-year averaging and is included in federal taxable income, then it should not be reported again. Amounts entered on this line may be eligible for the pension exclusion.

Dependent Child Income - Enter the smaller of the amount from line 14, federal Form 8814 or $1000 if you are electing to report your child’s income for federal tax purposes.

Charitable Gross Conservation Easement - Enter any federal charitable contribution deduction on which you also claimed a Colorado gross conservation easement credit. If this applies to you, please see FYI Publication Income 39

Partnership/Fiduciary - Enter any fiduciary adjustment or partnership modification that increases your federal taxable income.

Alien Labor - The amount of expenses for unauthorized alien labor services. If this applies to you, please see FYI Publication Income 64