IRS Guidance on TABOR and what it means for you
The IRS announced guidance(opens in new window) on the federal tax status of refunds of state or local taxes and certain other payments made by state or local governments to individuals. In Colorado, this new guidance from the IRS affects TABOR refunds.
The Department of Revenue is still analyzing the impacts of the guidance, but we currently believe that it will generally impact Coloradans as follows:
- Coloradans who use the standard deduction when filing federal income tax returns will not likely have to report their TABOR refunds as income.
- Coloradans who itemize their deductions and also elect to deduct state and local general sales taxes (SALT) when filing federal income tax returns will likely have to report their TABOR refunds as income.
- Coloradans who itemize their deductions and do not deduct state and local general sales taxes (SALT) when filing federal income tax returns will not likely have to report their TABOR refunds as income.
Once the Department understands the extent of the guidance, we will develop materials to help inform, educate and answer Coloradans questions before the next income-tax filing season.
We also suggest Coloradans review the IRS guidance with their tax advisors. The impact on each individual Coloradan may vary, and the Department of Revenue cannot provide individualized federal tax advice.
If you have feedback about the IRS's recent guidance, please submit a comment at the Federal Income Tax Consequences of Certain State Payments(opens in new window) regulations web page.