HB 22-1123

HB 22-1123, also known as the Standard Deduction Adjustment bill, modifies how Colorado calculates state income tax for people who use the standard deduction on their federal taxes. It adjusts the amount that taxpayers can subtract from their taxable income based on changes in the cost of living and fuel prices since 2017. This adjustment helps account for inflation and rising fuel costs. The law took effect starting January 1, 2023, after being signed into law. This affects anyone who files Colorado state taxes and uses the standard deduction from their federal return.

Official Summary

For the purposes of determining state taxable income and calculating state income tax for taxpayers who claim the standard deduction allowed under section 63 (c) of the internal revenue code, the bill subtracts an amount from the taxpayer's federal taxable income equal to the standard deduction claimed by the taxpayer not adjusted pursuant to section 63 (c)(4) or (c)(7)(B)(ii) of the internal revenue code multiplied by the combination of: The percentage change in the United States department of labor's bureau of labor statistics consumer price index for Denver-Aurora-Lakewood for all items paid by all urban consumers, or its applicable predecessor or successor index, (CPI) in the most recent year compared to 2017; and Twenty thousandths of a percent for every percent that the United States department of labor's bureau of labor statistics motor fuel index, or its applicable predecessor or successor index, exceeds the increase in CPI since 2017. The subtraction is only allowed for income tax years commencing on or after January 1, 2023. (Note: This summary applies to this bill as introduced.)

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