A Colorado resident who joins the Armed Forces remains a Colorado resident unless the residency status is changed with the military. However, military personnel who are stationed outside the United States for at least 305 days may elect to file as a nonresident.
Military pay of nonresidents who are in Colorado on military orders is not subject to Colorado tax. However, any other earned income from Colorado sources is subject to Colorado tax.
Wages and tips of a qualifying nonresident spouse are not taxable in Colorado. A qualifying spouse must:
- Have moved to Colorado from another state,
- Be in Colorado solely to accompany their active duty servicemember spouse who is stationed in Colorado in accordance with military orders, and
- Have the same state of residency as the home of record of the servicemember.
Beginning on or after January 1, 2016, an active duty service member whose home of record is Colorado and whose state of legal residency is any state other than Colorado may reacquire legal residence in Colorado if at least one of the following five criteria are met. “Home of record” is the place one was living when they entered or re-enlisted in the military. An individual must:
- Register to vote in Colorado,
- Purchase residential property or an unimproved residential lot in Colorado,
- Title and register a motor vehicle in the state,
- Notify the state of the individual’s previous legal residence and the intent to make Colorado the individual’s state of legal residence, or
- Prepare a new last will and testament that indicates Colorado as the individual’s state of legal residence.
For the tax year that begins on January 1, 2016, and for subsequent tax years, an active duty service member who has reacquired residency in Colorado may:
- Claim a subtraction on the Colorado individual income tax return of an amount equal to any compensation received for active duty service in the armed forces, to the extent that the compensation is included in federal taxable income,
- Not file an individual income tax return with the State of Colorado if the individual’s only source of income is compensation that is subtracted from federal taxable income, and
- Elect not to deduct or withhold taxes from the individual’s wages if the individual’s withholding certificate indicates that the compensation is eligible to be subtracted from the Colorado income tax return.