If you are not a resident of the state of Colorado but you have income from Colorado sources, you would generally have to file a state tax return and pay Colorado income tax. Part-year residents are subject to Colorado state tax on all their income from all sources during the part of the year they are Colorado residents, and on income from Colorado sources during the part of the year they are nonresidents.
According to the Colorado Department of Revenue, you are considered a resident of Colorado if you have made your home in Colorado or your intention is to be a Colorado resident. Some of the factors taken into consideration to determine your Colorado residency for tax purposes include the residence of your spouse and children, property ownership in Colorado, school registration, voter registration, Colorado vehicle registration and driver’s license. If you did not reside in Colorado at any time during the tax year, you would be considered a nonresident for state income tax purposes.
If you are a nonresident, you would have to file a Colorado state tax return if you are required to file a federal tax return and you had any income from Colorado sources.
As indicated by the Colorado Department of Revenue, income from Colorado sources includes income from a business, trade, occupation or profession carried on in Colorado, including payments for work performed in Colorado as an employee or independent contractor. Rents or royalties from real or tangible personal property located in Colorado, or the gain or loss on the sale or disposition of that property would be Colorado source income.
Nonresidents are subject to a withholding tax on the sale of Colorado real estate in excess of $100,000. The withholding tax is the smaller of 2% of the sales price or the net proceeds from the sale, which is the net amount due to the seller on the settlement sheet. This tax would be withheld by the title insurance company or other person providing the closing and settlement service. The withheld tax is credited to the seller as an estimated state income tax payment.
Income from intangible property, such as patents, trademarks or copyrights, would be Colorado source income to the extent the intangible property is used in a trade, business, occupation or profession carried on in Colorado.
Income from a partnership, limited liability company, or S corporation and income from an estate or trust is taxable in Colorado if the income is from Colorado sources. The partnership, limited liability company or S corporation is required to ensure that nonresident partners or shareholders report their share of Colorado source income. This requirement can be met by filing a composite return on behalf of the nonresidents, which replaces the nonresidents’ individual Colorado state tax returns. The nonresident partners or shareholders can elect whether to be included in this composite return. The nonresidents could also sign an agreement with the partnership or S corporation to file a state tax return for them. Or the partnership or S corporation can withhold Colorado state income tax from the distributions to the nonresident partners or shareholders.
A nonresident would generally not be subject to Colorado state income tax on income from gambling at a Colorado casino. But according to the Colorado Department of Revenue, in the case of a professional gambler, the gambling income would be considered income from a business or profession in Colorado and would be taxable. This would depend on the circumstances, but if a gambler reports gambling profits and losses on Schedule C for federal tax purposes, the gambling income in Colorado would be subject to state tax.
Military pay received by members of the service stationed in Colorado who are not residents of Colorado is not subject to Colorado state income tax. Other sources of income in Colorado would be subject to tax. And a non-military spouse who is a not a resident of Colorado and is in Colorado only to be with the spouse who is a military service member stationed in Colorado is not subject to Colorado state tax on income for services performed in Colorado.
If you are a nonresident or part-year resident of Colorado and are required to file, you would file Colorado Form 104 and Form 104PN, Part-Year Resident/Nonresident Tax Calculation Schedule. According to the Colorado Department of Revenue, if you are married and file a joint federal tax return you must file a joint Colorado return even if one spouse is not a resident of Colorado.
Sources:
Form 104, Colorado Individual Income Tax Form 104
Form 104PN, Part-Year Resident/Nonresident Tax Calculation Schedule
Military Servicepersons, Colorado Department of Revenue
Nonresident Partners and Shareholders of Partnerships and S Corporations, Colorado Department of Revenue
Nonresident Real Estate Transactions – Required Withholding, Colorado Department of Revenue
Part-Year Resident and Nonresident Individuals, Colorado Department of Revenue
