Example

A taxpayer retired at the beginning of tax year 2023 at age 60. They contributed $5,000 to PERA between July 1, 1984, and December 31, 1986, that was subject to Colorado income tax at the time. They received $23,000 in PERA benefits in tax year 2023 that were included in their federal taxable income.

The PERA benefits qualify for both the pension and annuity subtraction and the PERA/DPSRS subtraction. The taxpayer first claims the pension and annuity subtraction, which is limited to $20,000. They then claim the PERA/DPSRS subtraction for the remaining $3,000 of PERA benefits included in their federal taxable income for tax year 2023 because this amount is less than the $5,000, they contributed to PERA between July 1, 1984, and December 31, 1986. The $2,000 difference between the amount of qualifying contributions and the PERA/DPSRS subtraction can be claimed as a subtraction in a subsequent tax year.

In tax year 2024, the taxpayer has $24,000 of PERA benefits included in their federal taxable income. The taxpayer first claims the pension and annuity subtraction, which is limited to $20,000. The remaining $4,000 of their PERA benefits is eligible for the PERA/DPSRS subtraction, but they can claim a PERA/DPSRS subtraction of only $2,000 because that is the amount of qualifying contributions remaining available for subtraction.