Nonresidents of Colorado Taxed on Colorado Real Estate

It is a little known fact that if a nonresident of Colorado owns real estate in Colorado, such as a ski condo, the nonresident must file a DR 104 and complete the 104PN Part-Year/Nonresident Computation Form upon sale or receipt of rent.

For example, a taxpayer who lives in California and owns a vacation ski condo in Aspen must file a Colorado State Income Tax Return DR 104 upon the sale of the condo or if taxpayer has rental income with respect to the ski condo.  As such, taxpayer would likely file two State tax returns: a California return and a Colorado return.

In addition to Colorado real estate, the following income sources are taxed:

  1. The ownership of any interest in real or tangible personal property in Colorado
  2. A business, trade, profession, or occupation carried on in Colorado
  3. The distributive share of partnership or limited liability company income, gain, loss, and deduction determined under CRS section 39-22-203
  4. The share of estate or trust income, gain, loss, and deduction determined under CRS section 39-22-404
  5. Income from intangible personal property, including annuities, dividends, interest, and gains from the disposition of intangible personal property to the extent that such income is from property employed in a business, trade, profession, or occupation carried on in Colorado. A nonresident, other than a dealer holding property primarily for sale to customers in the ordinary course of his trade or business, shall not be deemed to carry on a business, trade, profession, or occupation in Colorado solely by reason of the purchase and sale of property for his own account.
  6. His share of subchapter S corporation income, gain, loss, credit, and deduction allocable or apportionable to Colorado.

 

Denver Head Tax a deduction on Colorado State Income Tax Return

We do a host of tax return amendments for clients either as part of OVDP, or simply corrected errors spotted by clients of other CPA’s, c.f.  IRS Pre-Audit Investigations.

As part of our thorough review we noticed that a different accounting office had added back in full the amount of state and local income tax paid by a taxpayer.  Here’s what we gathered based on the tax law.

Colorado State Income Tax return 104 starts with the federal income tax from form 1040.  Pursuant to CRS §39-22-104, certain items are added; that is, taxpayer will pay Colorado State tax on those items even though taxpayer did not pay federal income tax on those items.

One such item is State Income Tax.  State and local income tax is deductible pursuant to IRC §164(a)(3) on a 1040.  It makes sense for Colorado to essentially disallow a deduction for the tax the income of which it is taxing.

Enter local tax, such as the Denver Head Tax. I have good news for you: the Denver Head Tax is deductible on the 1040 and Colorado 104.  It is not added in pursuant to CRS §39-22-104.  The add-in applies only to state income taxes, not local taxes.

 

 

Tax Preparation and Planning for Entrepreneurs and High Net Worth Individuals

Tax Preparation and Planning for Entrepreneurs and High Net Worth Individuals

During Tax season, we perform the most sophisticated tax preparation for you. We optimize shareholder and member basis, losses, gains, carryovers and carrybacks.  We ensure that you receive your deductions

Because we are vertically integrated, we provide you with simulated tax returns

If we find an error in your tax plan implementation, we bring it to your attention and provide our tax opinion.

We are vertically integrated.  To us this means that we start with the pieces that compose your tax return all the way up to strategic planning, legal planning, and integrate both for you.

After Tax Season
Tax season isn’t the only time to think about taxes. Nearly every business decision you make has a tax consequence, and we believe working with a tax professional year-round can help you make informed decisions to minimize tax liabilities and take advantage of every possible incentive.

It’s absolutely necessary to gain a thorough understanding of your company’s operations, tax elections and methods, not only to prepare an accurate, complete set of returns, but also to find the most effective means to save additional tax dollars and meet your financial objectives.

From implementing tax-saving strategies and reviewing new legislation to evaluating current elections and amending returns, our staff works tirelessly throughout the entire year to find the most effective ways to save you tax dollars and keep more of your hard-earned profits.

We are working on strategies to minimize the new Healthcare (ObamaCare) 3.8% Tax on Net Investment Income.  This tax is targeted at high income individuals (married filing jointly in excess of $250,000).

Click here to visit our Tax Preparation Page: Tax Preparation

Email us for a free consultation Phil@ColoradoLegal.com

Or call (303) 626-7000.