It is important to note that the income is properly taxed by Colorado if it is received while you are a Colorado resident. This credit is not meant to eliminate taxation of this income by Colorado. It merely prevents the double taxation of the income and the credit will generally be equal to the tax of the state with the lowest tax rate. Therefore, if the income is earned in a state that does not have a state income tax, the income is taxable in Colorado and no credit is available.

The credit is available for taxes paid to other states, the District of Columbia, and territories or possessions of the United States. It is not available for taxes paid to other countries.

The credit is computed on Form 104CR, which must be attached to the Colorado income tax return along with a copy of the tax return from the other state when the credit is claimed.

A nonresident of Colorado will never claim a credit for tax paid to another state in Colorado. They may be eligible for a similar credit in their state of residency.

A part-year resident will generally not claim the credit for tax paid to another state since their income is usually taxed only by the state of residency when the income is earned. However, if income is earned from sources in the other state while the taxpayer is a Colorado resident, then it may be taxed by both states. If this is the case the tax credit can be claimed. The computation of the credit for taxes paid to another state by a part-year resident is more complicated than it is for a full-year resident and the different computations are explained below. OnLine Taxes will automatically compute this credit for you based on the information you provide.

Form 104CR, line 9

Colorado adjusted gross income from sources in the other state is the amount of income earned from sources in the other state during that part of the year that the taxpayer was a resident of Colorado. This amount will always be the net of any Colorado subtractions reported on line 31 of the 104PN schedule to the extent they apply to that income. Do not include any income on this line that was earned while the taxpayer was a resident of the other state.

Form 104CR, line 10

Colorado adjusted gross income is the amount from line 33 of the Colorado column of the 104PN schedule.

Form 104CR, line 13

Only include the tax paid to the other state on that portion of the income that is being taxed by both states. Do not enter any tax paid on income that was earned while you were a resident of the other state. This amount can be calculated by dividing that portion of the total income earned and taxed by both states by that portion of the total income earned and taxed only by the other state, then multiplying the result by the total tax liability in other state.

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