A client is considering a move from NC to CO in the spring of 2024. I have done some preliminary looking around the CO tax rules, as well as downloaded the 2022 CO tax software.
Can a CO tax pro clarify (simple answers only) the following:
1 -- There appears to be no reduction of taxable Form 1099-R amounts for retirement pension income / 401k distributions. I did see some exclusion for a "Denver" (?) retirement plan. Client receives retirement income from State of NC and a related 401k plan.
2 - Based on the above, it would appear the only CO reductions from federal income will be the taxable portion of Soc Sec benefits and US govt interest reported on Sch B. (Schedule A will likely not apply.)
3 - NC allows a state tax credit for taxes paid to other states. Included in those calculations are "foreign" income / taxes, not unlike simplified Form 1116 calculations. It appears that CO only allows the credit for "states" with no inclusion of non-US taxes, such as on Canadian stocks. (Client has fairly substantial dividends from several Canadian corporations, with taxes at the customary 15% rate.)
NC has a weird animal known as the Bailey / Emory retirement exclusion for certain NC residents. Taking that away, and shrinking the "foreign state" tax credit, very rough calculations show the CO tax liability to be >2x what the NC tax liability is. OUCH!
Any answers / insight that can be offered here will be greatly appreciated. It may turn out the client just decides to remain in NC. . .
Thanks!
FE
Can a CO tax pro clarify (simple answers only) the following:
1 -- There appears to be no reduction of taxable Form 1099-R amounts for retirement pension income / 401k distributions. I did see some exclusion for a "Denver" (?) retirement plan. Client receives retirement income from State of NC and a related 401k plan.
2 - Based on the above, it would appear the only CO reductions from federal income will be the taxable portion of Soc Sec benefits and US govt interest reported on Sch B. (Schedule A will likely not apply.)
3 - NC allows a state tax credit for taxes paid to other states. Included in those calculations are "foreign" income / taxes, not unlike simplified Form 1116 calculations. It appears that CO only allows the credit for "states" with no inclusion of non-US taxes, such as on Canadian stocks. (Client has fairly substantial dividends from several Canadian corporations, with taxes at the customary 15% rate.)
NC has a weird animal known as the Bailey / Emory retirement exclusion for certain NC residents. Taking that away, and shrinking the "foreign state" tax credit, very rough calculations show the CO tax liability to be >2x what the NC tax liability is. OUCH!
Any answers / insight that can be offered here will be greatly appreciated. It may turn out the client just decides to remain in NC. . .
Thanks!
FE
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