First Regular Session
Seventy-fifth General Assembly
STATE OF COLORADO
INTRODUCED
LLS NO. 25-0749.02 Nicole Myers x4326
SENATE BILL 25-136
Senate Committees House Committees
State, Veterans, & Military Affairs
A BILL FOR AN ACT
C
ONCERNING AN EXPANSION OF THE STATE INCOME TAX SUBTRACTION101
FOR RETIREMENT BENEFITS TO ALLOW AN INDIVIDUAL TO102
SUBTRACT ALL SUCH BENEFITS FROM FEDERAL TAXABLE103
INCOME FOR THE PURPOSE OF CALCULATING STATE TAXABLE104
INCOME REGARDLESS OF THE INDIVIDUAL 'S INCOME OR AGE.105
Bill Summary
(Note: This summary applies to this bill as introduced and does
not reflect any amendments that may be subsequently adopted. If this bill
passes third reading in the house of introduction, a bill summary that
applies to the reengrossed version of this bill will be available at
http://leg.colorado.gov
.)
Current law allows any individual to deduct amounts, up to certain
caps based on the individual's age, received as pensions or annuities from
SENATE SPONSORSHIP
Pelton B.,
HOUSE SPONSORSHIP
Gonzalez R.,
Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
Capital letters or bold & italic numbers indicate new material to be added to existing law.
Dashes through the words or numbers indicate deletions from existing law. any source, to the extent included in federal adjusted gross income.
Notwithstanding the caps on the deduction for amounts received
as pensions or annuities from other sources, current law allows any
individual who is 65 years of age or older at the close of a taxable year to
subtract the total amount of social security benefits that the individual
received from the individual's federal taxable income, to the extent those
benefits were included in federal taxable income, when determining the
individual's state taxable income. Beginning January 1, 2025, this
subtraction is also allowed to any individual who is 55 years of age or
older and has an adjusted gross income for the applicable tax year that is
less than or equal to $75,000 if filing individually or $95,000 if filing
jointly.
For income tax years commencing on or after January 1, 2026, the
bill removes all caps on the deduction for amounts received as pensions
and annuities and allows any individual, regardless of age or income, to
subtract the total amount that the individual received as pension or
annuity income from the individual's federal taxable income, to the extent
that income was included in federal taxable income, when determining
the individual's state taxable income.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. In Colorado Revised Statutes, 39-22-104, amend2
(4)(f)(I), (4)(f)(III)(A), and (4)(f)(III)(B); repeal (4)(f)(III)(C) and3
(4)(f)(III)(D); and add (4)(f)(IV), (4)(f)(V), and (4)(f)(VI) as follows:4
39-22-104. Income tax imposed on individuals, estates, and5
trusts - single rate - report - tax preference performance statement6
- legislative declaration - definitions - repeal. (4) There shall be7
subtracted from federal taxable income:8
(f) (I) S
UBJECT TO THE PROVISIONS OF THIS SUBSECTION (4)(f), for9
income tax years commencing on or after January 1, 1989, amounts10
received as pensions or annuities from any source by any individual who11
is fifty-five years of age or older at the close of the taxable year, to the12
extent included in federal adjusted gross income;13
(III) (A) F
OR INCOME TAX YEARS COMMENCING PRIOR TO14
SB25-136-2- JANUARY 1, 2026, amounts subtracted under this subsection (4)(f) are1
capped at twenty thousand dollars per tax year for any individual who is2
fifty-five years of age or older but less than sixty-five years of age at the3
close of the taxable year. For income tax years commencing on or after4
January 1, 2025, the cap set forth in this subsection (4)(f)(III)(A) is5
calculated by first considering the total amount of social security benefits6
a taxpayer received that were included in federal taxable income at the7
close of the taxable year. If the total amount of such social security8
benefits exceeds the cap set forth in this subsection (4)(f)(III)(A), and the9
taxpayer's adjusted gross income for the applicable tax year is less than10
or equal to seventy-five thousand dollars if filing individually or11
ninety-five thousand dollars if filing jointly, then the cap is increased to12
an amount equal to the total amount of such social security benefits.13
(B) F
OR INCOME TAX YEARS COMMENCING PRIOR TO JANUARY 1,14
2026, amounts subtracted under this subsection (4)(f) are capped at15
twenty-four thousand dollars per tax year for any individual who is16
sixty-five years of age or older at the close of the taxable year. For17
income tax years commencing on or after January 1, 2022, the cap set18
forth in this subsection (4)(f)(III)(B) is calculated by first considering the19
total amount of social security benefits a taxpayer received that were20
included in federal taxable income at the close of the taxable year. If the21
total amount of such social security benefits exceeds the cap set forth in22
this subsection (4)(f)(III)(B), then the cap is increased to an amount equal23
to the total amount of such social security benefits.24
(C) For the purpose of determining the subtraction allowed by this
25
subsection (4)(f), in the case of a joint return, social security benefits26
included in federal taxable income shall be apportioned in a ratio of the27
SB25-136
-3- gross social security benefits of each taxpayer to the total gross social1
security benefits of both taxpayers.2
(D) As used in this subsection (4)(f), "pensions and annuities"3
means retirement benefits that are periodic payments attributable to4
personal services performed by an individual prior to his or her retirement5
from employment and that arise from an employer-employee relationship,6
from service in the uniformed services of the United States, or from7
contributions to a retirement plan that are deductible for federal income8
tax purposes. "Pensions and annuities" includes distributions from9
individual retirement arrangements and self-employed retirement10
accounts to the extent that such distributions are not deemed to be11
premature distributions for federal income tax purposes, amounts12
received from fully matured privately purchased annuities, social security13
benefits, and amounts paid from any such sources by reason of permanent14
disability or death of the person entitled to receive the benefits.15
(IV) (A) F
OR INCOME TAX YEARS COMMENCING ON OR AFTER16
J
ANUARY 1, 2026, ALL AMOUNTS RECEIVED AS PENSIONS OR ANNUITIES17
FROM ANY SOURCE BY ANY INDIVIDUAL WHO IS FIFTY -FIVE YEARS OF AGE18
OR OLDER AT THE CLOSE OF THE TAXABLE YEAR , TO THE EXTENT19
INCLUDED IN FEDERAL ADJUSTED GROSS INCOME ;20
(B) I
N ACCORDANCE WITH SECTION 39-21-304 (1), WHICH21
REQUIRES EACH BILL THAT CREATES A NEW TAX EXPENDITURE TO INCLUDE22
A TAX PREFERENCE PERFORMANCE STATEMENT AS PART OF A STATUTORY23
LEGISLATIVE DECLARATION , THE GENERAL ASSEMBLY FINDS AND24
DECLARES THAT THE GENERAL PURPOSE OF THE TAX EXPENDITURES25
CREATED IN THIS SUBSECTION (4)(f)(IV) IS TO PROVIDE TAX RELIEF FOR26
CERTAIN INDIVIDUALS AND THAT THE SPECIFIC PURPOSE OF THE TAX27
SB25-136
-4- EXPENDITURES IS TO PROVIDE SUCH TAX RELIEF TO INDIVIDUALS WHO1
RECEIVE PENSION OR ANNUITY BENEFITS . THE GENERAL ASSEMBLY AND2
THE STATE AUDITOR SHALL MEASURE THE EFFECTIVENESS OF THE3
EXEMPTION ALLOWED BY THIS SECTION BASED ON THE TOTAL AMOUNT OF4
PENSION AND ANNUITY BENEFITS THAT INDIVIDUALS SUBTRACT FROM5
THEIR FEDERAL TAXABLE INCOME WHEN CALCULATING THEIR STATE6
TAXABLE INCOME. THE DEPARTMENT OF REVENUE , IN CONSULTATION7
WITH THE STATE AUDITOR, SHALL COLLECT THE INFORMATION NECESSARY8
FOR THE STATE AUDITOR TO MEASURE THE EFFECTIVENESS OF THE INCOME9
TAX SUBTRACTION ALLOWED BY THIS SUBSECTION (4)(f)(IV) BASED ON10
THE TOTAL AMOUNT OF PENSION OR ANNUITY BENEFITS THAT INDIVI DUALS11
SUBTRACT FROM THEIR FEDERAL TAXABLE INCOME WHEN CALCULATING12
THEIR STATE TAXABLE INCOME.13
(V) F
OR THE PURPOSE OF DETERMINING THE SUBTRACTION14
ALLOWED BY THIS SUBSECTION (4)(f), IN THE CASE OF A JOINT RETURN,15
SOCIAL SECURITY BENEFITS INCLUDED IN FEDERAL TAXABLE INCOME16
SHALL BE APPORTIONED IN A RATIO OF THE GROSS SOCIAL SECURITY17
BENEFITS OF EACH TAXPAYER TO THE TOTAL GROSS SOCIAL SECURITY18
BENEFITS OF BOTH TAXPAYERS.19
(VI) A
S USED IN THIS SUBSECTION (4)(f), "PENSIONS AND20
ANNUITIES" MEANS RETIREMENT BENEFITS THAT ARE PERIODIC PAYMENTS21
ATTRIBUTABLE TO PERSONAL SERVICES PERFORMED BY AN INDIVIDUAL22
PRIOR TO THE INDIVIDUAL'S RETIREMENT FROM EMPLOYMENT AND THAT23
ARISE FROM AN EMPLOYER-EMPLOYEE RELATIONSHIP, FROM SERVICE IN24
THE UNIFORMED SERVICES OF THE UNITED STATES, OR FROM25
CONTRIBUTIONS TO A RETIREMENT PLAN THAT ARE DEDUCTIBLE FOR26
FEDERAL INCOME TAX PURPOSES . "PENSIONS AND ANNUITIES" INCLUDES27
SB25-136
-5- DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ARRANGEMENTS AND1
SELF-EMPLOYED RETIREMENT ACCOUNTS TO THE EXTENT THAT SUCH2
DISTRIBUTIONS ARE NOT DEEMED TO BE PREMATURE DISTRIBUTIONS FOR3
FEDERAL INCOME TAX PURPOSES , AMOUNTS RECEIVED FROM FULLY4
MATURED PRIVATELY PURCHASED ANNUITIES , SOCIAL SECURITY BENEFITS,5
AND AMOUNTS PAID FROM ANY SUCH SOURCES BY REASON OF PERMANENT6
DISABILITY OR DEATH OF THE PERSON ENTITLED TO RECEIVE THE BENEFITS .7
SECTION 2. Act subject to petition - effective date. This act8
takes effect at 12:01 a.m. on the day following the expiration of the9
ninety-day period after final adjournment of the general assembly; except10
that, if a referendum petition is filed pursuant to section 1 (3) of article V11
of the state constitution against this act or an item, section, or part of this12
act within such period, then the act, item, section, or part will not take13
effect unless approved by the people at the general election to be held in14
November 2026 and, in such case, will take effect on the date of the15
official declaration of the vote thereon by the governor.16
SB25-136
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