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TAXPAYER SERVICE DIVISION

FYI – For Your Information

State Tuition Program Contribution


Subtraction
TUITION PROGRAM 529(e)(3) of the Internal Revenue
CONTRIBUTIONS Code),
• As a result of the beneficiary’s death
or disability, or
You can deduct on your Colorado income • As a result of receiving a scholarship
tax return the payments or contributions and as long as the amount of
you make to certain "qualified state distribution, refunds, or withdrawals
tuition programs." [§39-22-104 (4) (i), made do not exceed the amount of the
C.R.S.]. You cannot take this deduction if scholarship provided during such tax
the payments or contributions were not year.
included in your federal taxable income. The amount of any taxable withdrawal or
distribution must be added to taxable
What is a Qualified State Tuition income on Form 104 on the "Other
Program? additions" line in the year the distribution
is received.
For purposes of this subtraction, a quali-
fied state tuition program is a "529 Col- Similarly, if you use these funds to pay
lege Savings Plan" administered by the education expenses of someone other
CollegeInvest and includes the Direct than the designated beneficiary, the funds
Portfolio College Savings Plan, Scholars become taxable in Colorado -- even if the
Choice College Savings Program, Stable expenses otherwise qualify as higher
Value Plus College Savings Plan, and educational expenses.
Prepaid Tuition Fund.
Common Questions
Improper Distributions
States other than Colorado have qualified
The principal amount of any money tuition programs. Can I subtract on my
deposited into a qualified state tuition Colorado income tax return the payments Colorado Department
program is generally not taxable when of Revenue
or contributions I make to a qualified Taxpayer Service Division
withdrawn or distributed. However, the tuition program of a different state? 1375 Sherman St.
withdrawal or distribution will be taxable Denver, Colorado 80261
in the year withdrawal if: No. You can only subtract payments or Forms and other services:
1. you previously deducted the payments contributions made to a qualified state (303) 238-FAST (3278)
or contributions on a Colorado income tax tuition program established by Assistance:
return, and (303) 238-SERV (7378)
CollegeInvest or to a qualified tuition
2. the withdrawal is not made for one of program affiliated with a Colorado www.taxcolorado.com
the following purposes: education institution. As of the date of
• To pay qualified higher education this publication, CollegeInvest is the only
expenses (as defined in section qualified tuition program in Colorado. PAGE 1 OF 2
INCOME 44 (01/07)
Federal tax law permits an individual to Can an individual receive a tax deduction
rollover their investment from one state if they contribute to an unrelated
qualified tuition program to another state individual's contract?
qualified tuition program. If the
individual does a rollover into one of Yes. There is no requirement that the
Colorado's state qualified tuition beneficiary be related to the contributor.
programs is this considered a contribution
that qualifies for the Colorado tax Is there a limit to how much I can subtract
deduction? on my Colorado income tax return for
No. Since the funds being rolled over into payments or contributions?
the Colorado state qualified tuition
program are not included in federal No. However, the qualified state tuition
taxable income for the tax year, a program limits the amount of payments or
deduction is not allowed. contributions you can make to the
program. This, in turn, will limit your
If an individual does a rollover between subtraction.
two CollegeInvest programs, will the
rollover amount qualify for the How can I receive additional information
subtraction? on CollegeInvest and the plans that they
offer?
No. Since the funds being rolled over into
another program are not included in Contact CollegeInvest at
federal taxable income for the tax year, a www.collegeinvest.org or call
deduction is not allowed. 800-448-2424

If an individual takes a Colorado tax FURTHER INFORMATION


deduction and does a rollover to another
state qualified tuition program (not a FYIs, commonly used forms and
Colorado program) but eventually uses all additional tax information are available
disbursements for payment of qualified on the Web at www.taxcolorado.com
higher education expenses, is he/she
subject to recapture of the deduction? For additional Colorado tax information
visit the "Tax Information Index" which
Yes. An amount withdrawn from a covers a variety of topics including links
qualified Colorado tuition program and to forms, publications, regulations,
rolled over into a non-qualified tuition statutes and general questions and
program must be added into Colorado answers. The "Tax Information Index" is
taxable income (recaptured) in the year of located at www.taxcolorado.com
the rollover.
FYIs provide general information concerning a
There is a provision in the Colorado variety of Colorado tax topics in simple and
statute that states no exclusion will be straightforward language. Although the
allowed pursuant to this paragraph to the FYIs represent a good faith effort to provide
extent such payments or contributions are accurate and complete tax information, the
excluded from the taxpayer's federal
information is not binding on the Colorado
taxable income for the taxable year. This
Department of Revenue, nor does it replace,
provision suggests that an individual
contributing money from a savings alter or supersede Colorado law and regula-
account (monies earned in prior year(s)) tions. The Executive Director, who by
would not be eligible for a Colorado tax statute is the only person having authority to
deduction. Is this true? bind the Department, has not formally
reviewed and/or approved these FYIs.
No. Provided the taxpayer has sufficient
income during the tax year to cover the
contribution, there is no way to determine
whether a taxpayer has used current year
funds or prior year savings to actually
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make the contribution. INCOME 44 (01/07)