Colorado Capital Gains Tax - The Rules

January 14, 2004
By Srinidhi Goenka

In the United States, the taxation policies differ from state to state depending upon the financial situation of the state, its economic goals and its performance over the past few years. The Colorado capital gains tax is subject to three different rules.

There is a general rule which is applicable every year to all capital gains regardless of the fact that whether there has been a budget surplus or not. This general rule consists of two additional clauses. These clauses for the capital gains tax in Colorado are decided every year depending upon the fact that whether there was a budget surplus or not in that taxable year.

The Rules For Taxation In Colorado
According to the general rule, all capital gains from the sales of assets of Colorado which have been acquired on r after May 9, 1994 are excluded from capital gains. In order to qualify for this rule, you must have held these assets at least for 5 years and also meet certain other conditions.

Capital gains made from the sale of Colorado assets before May 9, 1994 can also be subtracted from taxable income. But this is only effective for years beginning on or after January 1, 1999. Also, it is only applicable in those years where there has been a budget surplus in Colorado.

Also, for tax years beginning on or after January 1, 2001, the subtraction applies to gains on assets held for at least one year. Again, this law applies only if there is a Colorado surplus of at least $430 million.

The Bush government plans to make drastic cuts in the capital gains tax in order to attract investments and create jobs in the new economy. The effects of these acts are yet to be seen in Colorado.