Active Duty Servicemembers

Resident Servicemembers

Every person in the military service must have a home state. A servicemember remains a resident of the state in which he/she resided at the time he/she entered the service unless he/she declares residency in another state. The servicemember would declare residency in another state by changing his/her residency with the Consolidated Base Personnel Office or Military Pay Office. Only the servicemember's home state may tax his/her military income.

A serviceperson who is a Colorado full-year resident is taxed in the same manner as any other Colorado resident. Colorado resident service member are those who are Colorado residents when they enter the service or those who are from another state and who choose to become Colorado residents.

For detailed information, please review the guidance publication Income Tax Topics: Military Servicemembers.

Military Serving Outside of the U.S. for 305 Days or More

A service member who is a full-year Colorado resident who spends at least 305 days of the tax year outside of the 50-state boundary of the United States while stationed outside of the United States for active military duty may file as a nonresident on the Colorado income tax return. The service member's spouse may also file as a nonresident if the spouse accompanies the service member outside of the country for at least 305 days of the tax year while they are stationed there on active military duty.

Reacquisition of Residency During Active Military Service

(Formerly known as the Military Income Tax Exemption)

Residency Qualification Questionnaire

1. Is your Home of Record, Colorado?

   • Yes. Go to Question #2.

   • No. Stop, you do not qualify for this subtraction.

2. After enlisting or entering the military, have you acquired legal residence in a state other than Colorado?

   • Yes. Go to Question #3.

   • No. Stop, you do not qualify for this subtraction.

3. On or after January 1, 2016 did you reacquire legal residency in Colorado?

   • Yes. You meet the three requirements to claim a subtraction for any compensation included in your federal taxable income received for active duty service after reacquiring Colorado residency.

   • No. Stop, you do not qualify for this subtraction.

Service Members with Colorado as Their Home of Record

Beginning on or after January 1, 2016, an active duty service member whose Home of Record is Colorado and whose state of legal residency is any state other than Colorado may reacquire legal residency in Colorado if at least one of the following five criteria are met (these same five criteria apply when acquiring legal residency in another state):

1. Register to vote in Colorado.
2. Purchase residential property or an unimproved residential lot in Colorado.
3. Title and register a motor vehicle in the state.
4. Notify the state of the individual's previous legal residence and the intent to make Colorado the individual's state of legal residence, or
5. Prepare a new last will and testament that indicates Colorado as the individual's state of legal residence.

Form DD 2058‚ State of Legal Residence Certificate‚ another tool that may be used to show intent to change legal residency. Service members complete this form to certify their state of legal residence to their employer for the purpose of withholding state income taxes from military pay.

How Reacquiring Colorado Residency Effects Colorado Income Tax

For the tax year that begins on January 1, 2016 and for subsequent tax years, an active duty service member who has reacquired residency in Colorado may claim the Reacquisition of Residency During Active Military Service Subtraction on the Subtraction from Income Schedule (DR 0104AD). On line 14, enter an amount equal to any compensation received for active duty service in the armed forces, to the extent that the compensation is included in Federal Taxable Income.

Part-Year & Nonresident Servicemembers

Service Member Serving in a Combat Zone

Active duty pay earned in a combat zone that qualifies for the federal tax exemption is not subject to Colorado income tax. However, to the extent income is included in federal taxable income, Colorado tax will also be due on the income. Colorado law allows military and support personnel stationed in a combat zone, as declared by the President, to postpone filing and paying state income taxes until 180 days after their assignment in the combat zone ends. Interest and penalty are deferred during this period. Because most Colorado taxpayers receive a refund, affected taxpayers may want to plan ahead to authorize someone else to file their income tax return for them using a Power of Attorney Form (DR 0145). If the return is filed under this 180-day extension, write the name of the applicable combat zone across the top of the Colorado Form 104.

Nonresident Servicemember

A nonresident service member is not required to report his/her military income to Colorado. However, if the service member earned nonmilitary Colorado income, this income must be reported to Colorado for income tax purposes. The service member must pay Colorado tax on the following: nonmilitary Colorado salaries, nonmilitary Colorado wages, nonmilitary Colorado tips, nonmilitary Colorado commissions, income from a Colorado business, income from rents, royalties, and/or gains from the sale of tangible personal property or real property located in Colorado.

Resident Service Member

A service person who is a Colorado full-year resident is taxed in the same manner as any other Colorado resident. Colorado resident service members are those who are Colorado residents when they enter the service or those who are from another state and who choose to become Colorado residents. See the "Resident Service Member" section above for more information.

Families of Active Duty Servicemembers

Nonresident Spouses

The Colorado income tax filing status (joint or separate) must match the status used for federal income tax filing purposes. For example, if a taxpayer and spouse filed a joint federal return, they must file a joint Colorado return. If a taxpayer and spouse filed separate federal returns, they must file separate Colorado returns.

For tax years beginning on or after January 1, 2009, a military spouse may be able to exclude their wages and tips from Colorado income tax, in certain circumstances. The spouse must meet all of the following criteria:

• The service person and their spouse are married.
• The spouse moved to Colorado from another state and the spouse works in Colorado.
• The spouse's sole purpose for being in Colorado is to accompany the service person while they are stationed in Colorado on military orders.

The spouse would need to file a DR 0104PN form to apportion their Colorado sourced income each year. Additionally, the spouse should submit a DR 1059 to their Colorado Employer when they are hired. Then the spouse should submit the signed DR 1059 to the Department each year when filing their tax returns. Note: This form is needed for the employer because the employer would be required to withhold income taxes if the spouse works in Colorado. If the employer does not withhold any CO state taxes from the spouse's paycheck, then the employer would need the DR 1059 on file. Additionally, the spouse must provide the Department with a copy of the service member's military orders and a copy of their military ID.

Sign Income Tax Return for Spouse/Child Out of the Country on Military Orders

A taxpayer may authorize someone else to act on their behalf, including filing their return, by granting a power of attorney. For instructions regarding acceptable forms for a power of attorney, see form DR 0145, Colorado Tax Information Authorization or Power of Attorney.