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Second Regular Session
Seventy-fifth General Assembly
STATE OF COLORADO
INTRODUCED
LLS NO. 26-0041.01 Caroline Martin x5902 HOUSE BILL 26-1062
House Committees Senate Committees
Finance
A BILL FOR AN ACT
CONCERNING AN EXPANSION OF THE STATE INCOME TAX SUBTRACTION101
FOR RETIREMENT BENEFITS TO ALLOW AN INDIVIDUAL TO102
SUBTRACT ALL SUCH BENEFITS FROM FEDERAL TAXABLE103
INCOME FOR THE PURPOSE OF CALCULATING STATE TAXABLE104
INCOME.105
Bill Summary
(Note: This summary applies to this bill as introduced and does
not reflect any amendments that may be subsequently adopted. If this bill
passes third reading in the house of introduction, a bill summary that
applies to the reengrossed version of this bill will be available at
http://leg.colorado.gov.)
Current law allows any individual to deduct amounts, up to certain
caps based on the individual's age, received as pensions or annuities from
HOUSE SPONSORSHIP
Weinberg,
SENATE SPONSORSHIP
(None),
Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
Capital letters or bold & italic numbers indicate new material to be added to existing law.
Dashes through the words or numbers indicate deletions from existing law.
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 old 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. This subtraction is also allowed to any
individual who is 55 years old 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, 2027, the
bill removes all caps on the deduction for amounts received as pensions
and annuities and allows any individual who is 55 years old or older,
regardless of 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.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. In Colorado Revised Statutes, 39-22-104, amend2
(4)(f)(I), (4)(f)(III)(A), and (4)(f)(III)(B); repeal (4)(f)(III)(C) and3
(4)(f)(III)(D); and add (4)(f)(IV), (4)(f)(V), and (4)(f)(VI) as follows:4
39-22-104. Income tax imposed on individuals, estates, and5
trusts - single rate - report - tax preference performance statement6
- legislative declaration - definitions - repeal.7
(4) There shall be subtracted from federal taxable income:8
(f) (I) SUBJECT TO THE PROVISIONS OF THIS SUBSECTION (4)(f), for9
income tax years commencing on or after January 1, 1989, amounts10
received as pensions or annuities from any source by any individual who11
is fifty-five years of age or older at the close of the taxable year, to the12
extent included in federal adjusted gross income;13
(III) (A) F OR INCOME TAX YEARS COMMENCING PRIOR TO14
JANUARY 1, 2027, amounts subtracted under this subsection (4)(f) are15
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capped at twenty thousand dollars per tax year for any individual who is1
fifty-five years of age or older but less than sixty-five years of age at the2
close of the taxable year. For income tax years commencing on or after3
January 1, 2025, the cap set forth in this subsection (4)(f)(III)(A) is4
calculated by first considering the total amount of social security benefits5
a taxpayer received that were included in federal taxable income at the6
close of the taxable year. If the total amount of such social security7
benefits exceeds the cap set forth in this subsection (4)(f)(III)(A), and the8
taxpayer's adjusted gross income for the applicable tax year is less than9
or equal to seventy-five thousand dollars if filing individually or10
ninety-five thousand dollars if filing jointly, then the cap is increased to11
an amount equal to the total amount of such social security benefits.12
(B) FOR INCOME TAX YEARS COMMENCING PRIOR TO JANUARY 1,13
2027, amounts subtracted under this subsection (4)(f) are capped at14
twenty-four thousand dollars per tax year for any individual who is15
sixty-five years of age or older at the close of the taxable year. For16
income tax years commencing on or after January 1, 2022, the cap set17
forth in this subsection (4)(f)(III)(B) is calculated by first considering the18
total amount of social security benefits a taxpayer received that were19
included in federal taxable income at the close of the taxable year. If the20
total amount of such social security benefits exceeds the cap set forth in21
this subsection (4)(f)(III)(B), then the cap is increased to an amount equal22
to the total amount of such social security benefits.23
(C) For the purpose of determining the subtraction allowed by this24
subsection (4)(f), in the case of a joint return, social security benefits25
included in federal taxable income shall be apportioned in a ratio of the26
gross social security benefits of each taxpayer to the total gross social27
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security benefits of both taxpayers.1
(D) As used in this subsection (4)(f), "pensions and annuities"2
means retirement benefits that are periodic payments attributable to3
personal services performed by an individual prior to his or her retirement4
from employment and that arise from an employer-employee relationship,5
from service in the uniformed services of the United States, or from6
contributions to a retirement plan that are deductible for federal income7
tax purposes. "Pensions and annuities" includes distributions from8
individual retirement arrangements and self-employed retirement9
accounts to the extent that such distributions are not deemed to be10
premature distributions for federal income tax purposes, amounts11
received from fully matured privately purchased annuities, social security12
benefits, and amounts paid from any such sources by reason of permanent13
disability or death of the person entitled to receive the benefits.14
(IV) (A) F OR INCOME TAX YEARS COMMENCING ON OR AFTER15
JANUARY 1, 2027, ALL AMOUNTS RECEIVED AS PENSIONS OR ANNUITIES16
FROM ANY SOURCE BY ANY INDIVIDUAL WHO IS FIFTY-FIVE YEARS OLD OR17
OLDER AT THE CLOSE OF THE TAXABLE YEAR, TO THE EXTENT INCLUDED18
IN FEDERAL ADJUSTED GROSS INCOME;19
(B) I N ACCORDANCE WITH SECTION 39-21-304 (1), WHICH20
REQUIRES EACH BILL THAT CREATES A NEW TAX EXPENDITURE TO INCLUDE21
A TAX PREFERENCE PERFORMANCE STATEMENT AS PART OF A STATUTORY22
LEGISLATIVE DECLARATION , THE GENERAL ASSEMBLY FINDS AND23
DECLARES THAT THE GENERAL PURPOSE OF THE TAX EXPENDITURES24
CREATED IN THIS SUBSECTION (4)(f)(IV) IS TO PROVIDE TAX RELIEF FOR25
CERTAIN INDIVIDUALS AND THAT THE SPECIFIC PURPOSE OF THE TAX26
EXPENDITURES IS TO PROVIDE SUCH TAX RELIEF TO INDIVIDUALS WHO27
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RECEIVE PENSION OR ANNUITY BENEFITS . THE GENERAL ASSEMBLY AND1
THE STATE AUDITOR SHALL MEASURE THE EFFECTIVENESS OF THE2
EXEMPTION ALLOWED BY THIS SECTION BASED ON THE TOTAL AMOUNT OF3
PENSION AND ANNUITY BENEFITS THAT INDIVIDUALS SUBTRACT FROM4
THEIR FEDERAL TAXABLE INCOME WHEN CALCULATING THEIR STATE5
TAXABLE INCOME . THE DEPARTMENT OF REVENUE , IN CONSULTATION6
WITH THE STATE AUDITOR, SHALL COLLECT THE INFORMATION NECESSARY7
FOR THE STATE AUDITOR TO MEASURE THE EFFECTIVENESS OF THE INCOME8
TAX SUBTRACTION ALLOWED BY THIS SUBSECTION (4)(f)(IV) BASED ON9
THE TOTAL AMOUNT OF PENSION OR ANNUITY BENEFITS THAT INDIVIDUALS10
SUBTRACT FROM THEIR FEDERAL TAXABLE INCOME WHEN CALCULATING11
THEIR STATE TAXABLE INCOME.12
(V) F OR THE PURPOSE OF DETERMINING THE SUBTRACTION13
ALLOWED BY THIS SUBSECTION (4)(f), IN THE CASE OF A JOINT RETURN ,14
SOCIAL SECURITY BENEFITS INCLUDED IN FEDERAL TAXABLE INCOME15
SHALL BE APPORTIONED IN A RATIO OF THE GROSS SOCIAL SECURITY16
BENEFITS OF EACH TAXPAYER TO THE TOTAL GROSS SOCIAL SECURITY17
BENEFITS OF BOTH TAXPAYERS.18
(VI) A S USED IN THIS SUBSECTION (4)(f), " PENSIONS AND19
ANNUITIES" MEANS RETIREMENT BENEFITS THAT ARE PERIODIC PAYMENTS20
ATTRIBUTABLE TO PERSONAL SERVICES PERFORMED BY AN INDIVIDUAL21
PRIOR TO THE INDIVIDUAL'S RETIREMENT FROM EMPLOYMENT AND THAT22
ARISE FROM AN EMPLOYER -EMPLOYEE RELATIONSHIP, FROM SERVICE IN23
THE UNIFORMED SERVICES OF THE UNITED STATES, OR FROM24
CONTRIBUTIONS TO A RETIREMENT PLAN THAT ARE DEDUCTIBLE FOR25
FEDERAL INCOME TAX PURPOSES. "PENSIONS AND ANNUITIES" INCLUDES26
DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ARRANGEMENTS AND27
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SELF-EMPLOYED RETIREMENT ACCOUNTS TO THE EXTENT THAT SUCH1
DISTRIBUTIONS ARE NOT DEEMED TO BE PREMATURE DISTRIBUTIONS FOR2
FEDERAL INCOME TAX PURPOSES , AMOUNTS RECEIVED FROM FULLY3
MATURED PRIVATELY PURCHASED ANNUITIES, SOCIAL SECURITY BENEFITS,4
AND AMOUNTS PAID FROM ANY SUCH SOURCES BY REASON OF PERMANENT5
DISABILITY OR DEATH OF THE PERSON ENTITLED TO RECEIVE THE BENEFITS.6
SECTION 2. Act subject to petition - effective date. This act7
takes effect at 12:01 a.m. on the day following the expiration of the8
ninety-day period after final adjournment of the general assembly (August9
12, 2026, if adj ournment sine die is on May 13, 2026); except that, if a10
referendum petition is filed pursuant to section 1 (3) of article V of the11
state constitution against this act or an item, section, or part of this act12
within such period, then the act, item, section, or part will not take effect13
unless approved by the people at the general election to be held in14
November 2026 and, in such case, will take effect on the date of the15
official declaration of the vote thereon by the governor.16
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