Colorado Individual Income Tax Glossary

This webpage is a glossary of terms related to the Colorado Individual Income Tax. It defines and explains key concepts for taxpayers, including:

Taxable Income and Filing: Definitions for Federal Taxable Income, Colorado Taxable Income (which is based on federal income plus Colorado Additions and minus Subtractions), and Adjusted Gross Income (AGI). It also outlines Filing Requirements for full-year residents, part-year residents, and nonresidents with Colorado-Source Income, and mentions the Due Date and Extension process.
Payments and Penalties: Explanation of Estimated Tax and the associated Estimated Tax Penalty. It defines Balance Due and details various penalties, including the Delinquent Payment Penalty and Collection Penalty, which may involve a Collection Agency Fee or Distraint Warrant.
Credits: Descriptions of Credit types, including refundable and nonrefundable credits, and specifics on the Child Tax Credit. The term Carryforward is explained in relation to excess credits and overpayments.
Miscellaneous Terms: Definitions for Alternative Minimum Tax ("AMT"), Apportionment (for part-year residents and nonresidents), Colorado Account Number (CAN), Electronic Filing, Free File, Form 1040, Full-Year Resident Individual, Installment Agreement, Interest, and Letter ID.

Jump to:

A, B, D, E, F, I, L, M, N, O, P, R, S, T, V, W

In determining your Colorado taxable income on your Colorado Individual Income Tax Return, you must add certain required Colorado additions to your federal taxable income. For additional information about Colorado additions, please see Part 3 of the Colorado Individual Income Tax Guide.

Adjusted Gross Income (AGI)

Adjusted gross income is an amount computed on your federal income tax return (generally IRS Form 1040). It is your total (gross) income from all sources minus certain allowable federal adjustments (see IRS.gov/filing/adjusted-gross-income). AGI is often used to determine your eligibility for Colorado income tax credits, like the Child Tax Credit and the Earned Income Tax Credit.

Agreement to Pay

See Payment Plan.

Alternative Minimum Tax (AMT)

Colorado AMT is an addition to your regular Colorado income tax, but it does not apply to most individuals. Colorado AMT is based largely on federal alternative minimum taxable income, making it likely that a taxpayer who owes federal AMT will also owe Colorado AMT. Federal AMT applies to taxpayers who have certain types of income that receive favorable treatment, or who qualify for certain deductions, under federal tax law. For additional information, please see Part 2 of the Colorado Individual Income Tax Guide, the Colorado Alternative Minimum Tax Computation Schedule, and IRS Form 6251.

Apportionment

Apportionment is a step in the process for computing Colorado income tax for part-year residents and nonresidents. If you are a part-year resident or nonresident, you must first calculate your Colorado tax as if you were a full-year resident. The calculated tax is then multiplied by an apportionment percentage computed on your Part-Year Resident/ Nonresident Tax Calculation Schedule (Form DR 0104PN). For additional information, please see Department publication Income Tax Topics: Part-Year Residents & Nonresidents.

B

Balance Due

Your balance due for a tax year includes any unpaid tax, plus any applicable penalties and interest.

C

Carryforward

The term “carryforward” is used in relation to both excess nonrefundable credits and income tax overpayments applied toward your income tax liability in a subsequent tax year. If your estimated and extension payments exceed your tax liability for the tax year, you may elect to carry forward and apply some or all of your overpayment toward your required estimated payment for the first quarter of the next tax year. If you are allowed any nonrefundable credits that exceed your tax liability for the tax year, you can generally carry forward and apply the excess credit toward your tax liability for the next tax year.

Child Tax Credit

The Colorado Child Tax Credit is one of multiple Colorado income tax credits allowed to individuals who have qualifying children. You may claim this credit only if your adjusted gross income is below certain limits. You may claim this credit only for eligible children under age six, although a similar credit, the Family Affordability Credit, is allowed for eligible children up to age 16. You must complete form DR 0104CN with your Colorado Individual Income Tax Return to claim either of these credits. For information about additional credits allowed for qualifying children please see the following Department publications:

Collection Agency Fee

The Department of Revenue may refer your unpaid tax debt to a third-party collection agency. These agencies are authorized to enforce collections on behalf of the Department and impose an additional fee of up to 20% of the total tax, penalties, and fees collected. The fee is in addition to the tax, penalty, and interest due and cannot be waived by the Department. For additional information about collection agencies, please visit Tax.Colorado.gov/collections.

Collection Penalty

If you receive a notice of final determination and demand for payment and fail to either pay the balance due or set up a payment plan, the law requires the Department to add a collection penalty to your balance due. The collection penalty is 15% of the unpaid tax. See also Collection Agency Fee.

Colorado Account Number (CAN)

Your CAN is an 8-digit account number issued by the Colorado Department of Revenue to identify your account. Your CAN is different from your Social Security Number (SSN), Federal Employer Identification Number (FEIN), or Individual Taxpayer Identification Number (ITIN). For additional information, please visit Tax.Colorado.gov/how-to-look-up-CAN.

Colorado-Source Income

If you are a nonresident individual who has Colorado-source income, you must file a Colorado Individual Income Tax Return and pay any applicable tax (and any applicable estimated tax). A nonresident individual’s Colorado-source income is their income that is derived from Colorado sources and therefore subject to Colorado income taxes. Some of the more common types of Colorado-source income are wages for work performed in Colorado, income from business activity in Colorado, and income (such as rents or capital gains) from real property in Colorado. Please see Department publication Income Tax Topics: Part-Year Residents & Nonresidents for additional information about Colorado-source income.

Colorado Tax

Colorado income tax is calculated as a percentage of your Colorado taxable income (and then apportioned if you are a part-year resident or nonresident). Any Colorado alternative minimum tax and credit recaptures you may owe are added to your Colorado income tax. You may claim any allowable credits, withholding, estimated tax payments, and extension payments to reduce your Colorado income tax liability. Any remaining unpaid tax is your net tax due.

Colorado Taxable Income

Colorado income tax is calculated as a percentage of your Colorado taxable income (and then apportioned if you are a part-year resident or nonresident). A taxpayer’s Colorado taxable income is their federal taxable income plus any applicable Colorado additions and minus any applicable Colorado subtractions. See also Part 2 of the Colorado Individual Income Tax Guide.

Credit

Colorado allows a variety of refundable and nonrefundable income tax credits. If you meet the applicable requirements for a credit, you may claim the credit and apply it to reduce your Colorado tax. For additional information, please see the Individual Credit Schedule and Part 5 of the Colorado Individual Income Tax Guide.

D

Delinquent Payment Penalty

If you do not file your return or pay the tax due by the applicable due date, you will owe a delinquent payment penalty. The penalty is the greater of $5 or a percentage of the unpaid tax equal to 5% plus 1/2% for each full or partial month the tax remains unpaid, not to exceed a total of 12%. For additional information, please see Department publication Tax Topics: Penalties and Interest and Part 8 of the Colorado Individual Income Tax Guide.

Distraint Warrant

A distraint warrant is issued in connection with unpaid taxes, authorizing the Department to employ certain measures to enforce collection. For additional information, please see Tax.Colorado.gov/Collections.

Due Date

Your Colorado individual income tax return, and the payment of any tax you owe, is due on April 15. An automatic six-month filing extension is allowed until October 15. The extension applies to the filing of your return, but not to the payment of your tax, which must be paid in full by April 15 to avoid penalties and interest. If a due date falls on a Saturday, Sunday, or legal holiday, the due date will be extended to the next business day. For additional information, please see Part 8 of the Colorado Individual Income Tax Guide.

E

Estimated Tax

In general, you must make quarterly estimated tax payments if your total Colorado tax liability, minus withholding and credits, will be more than $1,000 annually. If you do not remit the required estimated payments, you may owe an estimated tax penalty. For additional information, please see Part 7 of the Colorado Individual Income Tax Guide.

Estimated Tax Penalty

If you do not make any required quarterly estimated payments or underpay your required estimated tax, you will owe an estimated tax penalty. The penalty is an assessment of interest, calculated on the unpaid or underpaid amount, from the due date of the payment until the date the payment is made or the date the annual income tax return is due, whichever is earlier. If you owe an estimated tax penalty, you must complete form DR 0204 to compute the amount of the penalty. For additional information, please see Part 7 of the Colorado Individual Income Tax Guide.

Electronic Filing

Multiple filing options are available for you to file your return electronically over the internet. You can file your Colorado return directly with the Colorado Department of Revenue using Revenue Online. You can also file your Colorado return with IRS Free File tax preparation and filing services from trusted partners. The IRS trusted partners may offer free state filing or may charge a fee for filing a state return.

Extension

Colorado offers an automatic six-month extension from the April 15 filing deadline to October 15. This extension applies only to the filing of your return and not to the payment of your tax. You will owe interest on any tax not paid by the April 15 due date and you may also owe a delinquent payment penalty if 90% of your tax is not paid prior to the April 15 due date. You do not need to file any specific form to request a filing extension but, if your tax liability has not been fully paid prior to the April 15 due date, you can remit an extension payment with form DR 0158.

F

Federal Taxable Income

Colorado income tax is based on your Colorado taxable income, which is your federal taxable income modified by any applicable Colorado additions and subtractions. Your federal taxable income is calculated on your federal return (generally IRS Form 1040) as your gross income minus any applicable adjustments and deductions. For additional information, please see IRS Form 1040, IRS Publication 17, and IRS Publication 525.

Free File

IRS Free File lets qualified taxpayers prepare and file federal income tax returns online using guided tax preparation software. Some, but not all, tax preparation software provided by the IRS’s trusted partners offers free filing of a taxpayer’s state income tax return as well.

Filing Requirements

Each Colorado full-year resident, part-year resident individual, or nonresident individual with income from Colorado sources is required to file a Colorado return if they are required to file a federal income tax return or they incur a Colorado tax liability. If you are not required to file a federal income tax return, you generally are not required to file a Colorado income tax return. However, you may still want to file a Colorado return if you can claim any refundable credits.

Form 1040

IRS Form 1040 is used to file an annual federal income tax return. If you are required to file a Colorado individual income tax return, you must first complete IRS Form 1040 (or one of its variations, such as Form 1040-NR or Form 1040-SR) to compute your federal taxable income. You must then enter your federal taxable income on line 1 of your Colorado Individual Income Tax Return.

Full-Year Resident Individual

A full-year resident is someone who is a Colorado resident for the entire tax year. For information about residency rules for military service members, please see Department publication Income Tax Topics: Military Service members.

I

Installment Agreement

See Payment Plan.

Interest

If you do not pay your Colorado tax liability in full on or before the April 15th due date, you will owe interest on your net tax that was not paid prior to the due date. Interest is calculated from the due date until the date the tax is paid. If you do not pay your entire tax liability on or before the due date, you may also owe a delinquent payment penalty.

L

Letter ID

When you receive a letter or notice from the Colorado Department of Revenue about your taxes, the letter or notice has a "Letter ID" in the upper right corner of the page. The ID number starts with the letter "L." You may use the Letter ID as a security key to set up a login for your account in Revenue Online. You will then create a Username and Password to use each time you log-in to Revenue Online.

M

Modified Federal Adjusted Gross Income

Your modified federal adjusted gross income is your federal adjusted gross income modified for most Colorado additions and subtractions. The following Colorado additions and subtractions do not apply in computing your modified federal adjusted gross income:

the state income tax addback;
the qualified business income deduction addback;
the standard or itemized deduction addback;
the conservation easement addback;
the charitable contribution subtraction; and
the overtime compensation addback.

Modified Federal Taxable Income

Modified federal taxable income is another term for Colorado taxable income.

N

Net Tax

The term “net tax” may be used in different situations to mean slightly different things. In general, your net tax is the remaining amount of tax you owe after applying any credits you may claim to your total tax liability. In other cases, net tax may refer to your remaining tax after applying only your nonrefundable credits but before applying any refundable credits. Sometimes, net tax refers to any remaining tax you may owe after also crediting any withholding, estimated tax payments, and extension payments you may claim.

Nonresident Individual

You are a nonresident if you are not a Colorado resident for any part of the tax year. If you are a nonresident you must initially calculate your Colorado tax based on your entire Colorado taxable income. You must then apportion that tax by completing a Part-Year Resident/ Nonresident Tax Calculation Schedule (Form DR 0104PN). For additional information, please see Department publication Income Tax Topics: Part-Year Residents & Nonresidents.

For information about residency rules for military servicemembers, please see Department publication Income Tax Topics: Military Servicemembers.

Nonrefundable Credit

Certain income tax credits are nonrefundable. If you qualify for a nonrefundable credit, you can claim the credit and apply it toward your tax liability. However, if the amount of the allowable credit is more than your tax, you cannot claim a refund for the amount of the credit that exceeds your tax. Instead, you can generally carry forward and apply the excess credit toward your tax liability for the next tax year.

Notice of Deficiency or Rejection of Refund Claim

If the Department identifies an error in your tax return and makes an adjustment resulting in a balance due or a rejection of all or part of your refund claim, the Department will send you a notice of deficiency or rejection of refund claim. If you disagree with the adjustment the Department made, you can file a protest, following the instructions contained in the notice. For additional information about your protest rights, please visit Tax.Colorado.gov/taxation-disputes.

Notice of Final Determination and Demand for Payment

The Department issues a notice of final determination and demand for payment, as required by law, to indicate the conclusion of the protest process regarding an adjustment the Department made to your return. If you submitted a protest or requested a hearing regarding the adjustment, a notice of final determination and demand for payment will be issued after your protest has been resolved or after the hearing has been conducted. If you disagree with the notice of final determination, you can appeal the determination to the district court.

If you did not submit a timely protest or request a hearing within 30 days of the issuance of the notice of deficiency or rejection of refund claim, the Department will issue a notice of final determination and demand for payment. In this case, you cannot appeal the determination to the district court.

O

Overpayment

If your allowable refundable credits, payments, and withholding exceed your net tax, then you have overpaid your tax. You must file a return to request a refund for your overpayment, apply (“carry forward”) some or all of your overpayment toward your estimated tax for the next tax year, or to make a voluntary contribution with your overpayment.

P

Part-Year Resident Individual

A part-year resident individual is an individual who is domiciled in Colorado for only part of the tax year and generally includes anyone who moves into or out of Colorado during the tax year. If you are a nonresident you must initially calculate your Colorado tax based on your entire Colorado taxable income. You must then apportion that tax by completing a Part-Year Resident/ Nonresident Tax Calculation Schedule (Form DR 0104PN). For additional information, please see Department publication Income Tax Topics: Part-Year Residents & Nonresidents.

For information about residency rules for military servicemembers, please see Department publication Income Tax Topics: Military Servicemembers.

Partnership

Any legal entity (including any limited liability company) that is treated as a partnership for federal income tax purposes is also treated as a partnership for Colorado income tax purposes. Partnerships file IRS Form 1065 and Colorado form DR 0106. A partnership does not pay tax on its income but "passes through" any profits or losses to its partners. Partners must include partnership items on their tax or information returns.

If you are a partner in a partnership, the partnership must issue you federal Schedule K-1 (Form 1065) and a Colorado K-1 (DR 0106K). See the Individual Partner and Shareholder Instructions For Colorado K-1 available at Tax.Colorado.gov/individual-income-tax-guidance-publications.

Pass-Through Entity

See partnership and S corporation.

Payments

See estimated tax and extension.

Payment Plan

If you cannot completely pay your tax debt on its due date, you may request a payment plan with the Colorado Department of Revenue. For additional information, please visit Tax.Colorado.gov/payment-plan and Tax.Colorado.gov/payment-plan-FAQ.

Penalty

Colorado law authorizes several kinds of civil tax penalties. The most common individual income tax penalties are the delinquent payment penalty, the collection penalty, and the estimated tax penalty. Additionally, a recurring distraint warrant penalty may be imposed if the Department must repeatedly issue distraint warrants to enforce collection of your unpaid taxes. For additional information, please see Department publication Tax Topics: Penalties and Interest.

Protest

If you receive a notice of deficiency or rejection of refund claim from the Department and you disagree with the tax balance or refund reduction reflected in the notice, you may file a protest in accordance with the instructions in the notice. For additional information, please visit Tax.Colorado.gov/file-a-protest and Tax.Colorado.gov/protest-rights.

R

Recapture

The term “recapture” refers to the full or partial repayment of a tax credit claimed in a prior tax year. Recapture is required only for certain specific credits and relates generally to prescribed conditions of compliance during a specified period after the credit is claimed. For additional information, please see the DR 0104 Booklet.

Recurring Distraint Warrant Penalty (RDWP)

The Department will impose a recurring distraint warrant penalty if you repeatedly fail, neglect, or refuse to pay delinquencies, thereby requiring the issuance of distraint warrants to enforce the collection of unpaid taxes. The penalty is 15% of the delinquent taxes, interest, and penalties for the third, fourth, and fifth consecutive distraint warrants issued. Beginning with the sixth consecutive distraint warrant issued, the penalty is 30% of the delinquent taxes, interest, and penalties.

Refund

If you have overpaid your tax liability, you may request a refund for the overpayment. You may also claim a refund for the amount of any refundable credit you are allowed in excess of your net tax. You must file a return to request a refund.

Refundable Credit

Certain income tax credits are refundable. If you qualify for a refundable credit, you can claim the credit and apply it first toward your tax liability. If the amount of the allowable credit is more than your tax, you can claim a refund for the amount of the credit that exceeds your tax.

Residency

Your state of residency affects the calculation of your Colorado income tax. If you are a full-year resident, your tax is computed on all of your taxable income, but you may be allowed a credit for income tax paid to another state, if you have income from another state. If you are a part-year resident or nonresident, your Colorado income tax is apportioned. For information about residency rules for military servicemembers, please see Department publication Income Tax Topics: Military Servicemembers.

Resident Individual

In general, you are a Colorado resident if you are domiciled in Colorado. Your domicile is generally the place you consider to be your home. You are also a Colorado resident if you maintain a permanent place of residence in Colorado and spend, in aggregate, more than six months of the tax year in Colorado (the “six-month rule”). If you are a resident by virtue of the six-month rule, you are a full-year resident. Please see Part 1 of the Colorado Individual Income Tax Guide for additional information. For information about residency rules for military servicemembers, please see Department publication Income Tax Topics: Military Servicemembers.

Return

Your return is the form you must file on an annual basis to determine your net tax liability and any balance due or overpayment. Your return consists of form DR 0104, along with any supporting forms or schedules that you are required to file, such as forms DR 0104AD and DR 0104CR. We recommend that you file your return electronically to reduce processing delays and prevent errors.

The term “return” is sometimes mistakenly used to refer to a refund.

Revenue Online

Revenue Online is the Department’s online portal for managing, filing, and paying state-collected taxes and fees. You can file your individual income tax return through Revenue Online without setting up a login for your Revenue Online account, but will need a Revenue Online login to access other options and features in Revenue Online. Additional information can be found at Tax.Colorado.gov/training/ROL-help and Tax.Colorado.gov/training/file-individual-income-tax-online.

S

S Corporation

Any legal entity (including any limited liability company) that is treated as an S corporation for federal income tax purposes is also treated as an S corporation for Colorado income tax purposes. S corporations file IRS Form 1120-S and Colorado form DR 0106. S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns.

If you are a shareholder in an S corporation, the S corporation must issue you federal Schedule K-1 (Form 1120-S) and a Colorado K-1 (DR 0106K). See the Individual Partner and Shareholder Instructions For Colorado K-1 available at Tax.Colorado.gov/individual-income-tax-guidance-publications.

Subtraction

In determining a taxpayer’s Colorado taxable income on their Colorado Individual Income Tax Return, individuals may claim certain Colorado subtractions. Taxpayers must complete a Subtractions from Income Schedule (DR 0104AD) with their return to claim any subtractions. For additional information about Colorado subtractions, please see Part 4 of the Colorado Individual Income Tax Guide.

T

TABOR (Taxpayer Bill of Rights)

TABOR limits the amount of revenue that the state is permitted to retain and spend or save each year. TABOR requires that revenue collected above the limit for a given fiscal year be refunded in the following fiscal year. One of the refund mechanisms is the State Sales Tax Refund, which qualifying individuals can claim as a credit on their Colorado income tax returns. The State Sales Tax Refund is not allowed for every tax year. Its availability depends upon the amount of revenue collected and whether it is required to refund revenue collected over the limit.

Tax Rate

Colorado income tax is calculated as a percentage of your Colorado taxable income (and then apportioned if you are a part-year resident or nonresident). That percentage is the tax rate. The tax rate for 2022, 2023, and 2025 is 4.4%. For tax year 2024, the tax rate was temporarily reduced to 4.25%.

Taxable Income

See Colorado taxable income and federal taxable income.

U

Underestimation Penalty

See estimated tax penalty.

V

Voluntary Contribution

If you have overpaid your tax liability, you may make a voluntary contribution to donate some or all of your overpayment to a charitable organization. You must file form DR 0104CH with your return to make a voluntary contribution.

W

W-2

IRS Form W-2 is the form employers must complete to report wage and withholding information for each of their employees. If you are an employee, your employer must send you a W-2 reporting your wages and withholding, and file a copy with the Department, no later than January 31st of the following year. You will need to enter information from your W-2 on both your Colorado and federal income tax returns.

Warrant

The term “warrant” may be used in two different ways in relation to Colorado individual income tax. A refund warrant is a paper check issued by the Department to a taxpayer to refund an overpayment. The term “warrant” may also refer to a distraint warrant.

Withholding

Colorado law requires the payer of certain types of income to withhold Colorado income tax. The most common form of withholding is wage withholding that your employer withholds from your wages. Colorado income taxes may also be withheld from other types of income, link retirement income or unemployment compensation.

You must file an Employee's Withholding Certificate, IRS Form W-4, with your employer so that your employer can determine and withhold the correct amount of tax from your wages. You may also file a Colorado Employee Withholding Certificate, form DR 0004, with your employer, if necessary, to adjust your Colorado income tax withholding.

You may claim withholding as a credit against tax on your return. You will need your W-2 or 1099 to complete your return. If your withholding is more than your net tax, you can claim a refund for your overpayment.