SB 17-075

Senate Bill 17-075, which has been signed into law, introduces a special income tax deduction for military retirement benefits in Colorado. This means that people of any age can deduct a portion of their military retirement benefits from their state taxes, starting at 10% in 2018 and increasing by 10% each year until all such benefits are exempt. The existing deductions for other types of retirement benefits remain unchanged. This bill aims to provide tax relief specifically for those receiving military retirement benefits. Since the bill has been signed, it is now law and affects anyone who receives military retirement benefits in Colorado.

Official Summary

The starting point for determining state income tax liability is federal taxable income. This number is adjusted for additions and subtractions (deductions) that are used to determine Colorado taxable income, which amount is multiplied by the state's 4.63% income tax rate. Currently, a person who is 55-64 years old may deduct up to $20,000 of retirement benefits from federal taxable income, and a person who is 65 years old or older may deduct up to $24,000. These limits apply to retirement benefits from all sources, including those related to service in the military. The bill creates an additional deduction under which a person of any age may deduct a percentage of military retirement benefits from his or her state income tax. In 2018, the percentage is equal to 10%, and it increases by 10% each year thereafter until all military retirement benefits are exempt. All other retirement benefits and military retirement benefits in excess of the limit for the new deduction continue to be deductible under the existing deduction, subject to the existing limits on ages and amounts. (Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)

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