SB 25-136

Senate Bill 25-136 expands tax deductions for retirement benefits in Colorado. Currently, individuals aged 65 and older can deduct their Social Security benefits from state taxable income. Starting January 1, 2025, those aged 55 and older with an adjusted gross income below $75,000 (or $95,000 for joint filers) will also be eligible for this deduction. From 2026 onwards, all individuals can deduct their entire pension or annuity income from state taxable income without any age or income restrictions. The bill has been signed into law and is now in effect according to its outlined phases.

Official Summary

Current law allows any individual to deduct amounts, up to certain caps based on the individual's age, received as pensions or annuities from any source, to the extent included in federal adjusted gross income. Notwithstanding the caps on the deduction for amounts received as pensions or annuities from other sources, current law allows any individual who is 65 years of age or older at the close of a taxable year to subtract the total amount of social security benefits that the individual received from the individual's federal taxable income, to the extent those benefits were included in federal taxable income, when determining the individual's state taxable income. Beginning January 1, 2025, this subtraction is also allowed to any individual who is 55 years of age or older and has an adjusted gross income for the applicable tax year that is less than or equal to $75,000 if filing individually or $95,000 if filing jointly. For income tax years commencing on or after January 1, 2026, the bill removes all caps on the deduction for amounts received as pensions and annuities and allows any individual, regardless of age or income, to subtract the total amount that the individual received as pension or annuity income from the individual's federal taxable income, to the extent that income was included in federal taxable income, when determining the individual's state taxable income. (Note: This summary applies to this bill as introduced.)