39-22-104(4) Subtractions from Federal Taxable Income.

(1) Sequence of Modifications Decreasing Federal Taxable Income. Modifications decreasing federal taxable income may be claimed in the sequence most advantageous to the taxpayer. (2) Modification for Railroad Retirement and Railroad Unemployment Benefits. Railroad retirement benefits are exempt from state taxation under 45 U.S.C., paragraph 231m, and railroad unemployment benefits are exempt under 45 U.S.C., paragraph 352(e). Thus, to the extent that such income is included in federal taxable income, it may be modified out in determining Colorado taxable income. (3) Taxation of a Colorado Resident Individual on Income Earned Before Becoming Colorado Resident. Colorado taxable income of a Colorado resident individual is defined as the resident’s federal taxable income, as modified by additions and subtractions set forth in §§39-22-104(3) and (4), C.R.S., respectively. A resident individual’s income is subject to Colorado taxation regardless of whether it is derived from sources inside or outside of Colorado. Income generated from sources outside Colorado prior to a taxpayer becoming a Colorado resident, but received after the taxpayer becomes a resident, is subject to Colorado income tax. Examples include, but are not limited to, pension payments, deferred compensation payments, or income from the exercise of a stock option. However, credit for income tax paid to another state in the same year will be allowed with respect to income derived from sources within such state(s) after the individual becomes a Colorado resident. Cross Reference 1. See §39-22-108, C.R.S. and Department Rule 39-22-108 for information on the credit for taxes paid to another state.