What is the Colorado Minimum Tax Credit?

COLORADO MINIMUM TAX CREDIT

Taxpayers who are allowed a federal income tax credit for prior year minimum tax may claim a Colorado minimum tax credit. The Colorado and federal credits are both based upon the federal alternative minimum tax the taxpayer owed for the prior tax year. For example, if a taxpayer owes federal alternative minimum tax for tax year 2020, the taxpayer may be able to claim federal and Colorado minimum tax credits for tax year 2021.   

In order to claim the Colorado minimum tax credit, taxpayers must prepare and submit an Individual Credit Schedule (Form 104CR) with their Colorado Individual Income Tax Return (DR 0104). The Colorado credit is 12% of the federal minimum tax credit claimed on federal Form 8801 (for tax year 2021, the federal minimum tax credit used in calculating the Colorado minimum tax credit appears on line 25 of federal Form 8801). The Colorado minimum tax credit a taxpayer may claim is limited to the taxpayer’s net tax liability, including normal tax, AMT, and recapture of prior year credits. Any excess credit cannot be carried forward to another tax year.

If a taxpayer was a part-year resident or nonresidents in the prior year, the Colorado minimum tax credit they claim must be multiplied by the apportionment percentage used in calculating their AMT for the prior year. For example, if a taxpayer was a nonresident in tax year 2020 and the taxpayer’s AMT apportionment percentage for 2020 calculated using the worksheet in the instructions for the 104AMT was 30%, the 2021 Colorado minimum credit would be calculated by multiplying the taxpayer’s 2021 federal minimum tax credit by 12% and then by 30%