Footnotes · CE course notes · Form 1041 · Colorado
Colorado
At the desk
| Return | DR 0105, Colorado Fiduciary Income Tax Return; due with the federal return; 4.40% flat on Colorado taxable income after the distribution deduction. |
| Resident estate | The decedent was domiciled in Colorado at death. |
| Resident trust | Administered in Colorado (C.R.S. 39-22-103(10)) check; a trust can move its residence by moving its trustee and administration. |
| Nonresident beneficiaries | Colorado-source income passes through to them; the fiduciary reports it on the DR 0105 Schedule and the beneficiaries file DR 0104 nonresident returns, or the fiduciary withholds check. |
| Munis | Colorado exempts only Colorado and federal obligations; out-of-state municipal interest from a K-1 is an addition on the beneficiary’s DR 0104. |
| Estimates | DR 0105EP; follows the federal requirement check. |
| No estate tax | Colorado has no estate or inheritance tax; the DR 1210 estate tax return has not been required since 2005. |
On this page
- The return 3 notes
- Beneficiaries 4 notes
- The Colorado principal and income act 3 notes
- No estate or inheritance tax 2 notes
The return
- Colorado taxes resident estates and trusts on all income and nonresident estates and trusts on Colorado-source income, on the DR 0105, at the flat 4.40% individual rate. The starting point is federal taxable income from the 1041, so the federal distribution deduction, exemption and §642(c) deduction carry over; Colorado additions and subtractions follow the individual list where they apply to a fiduciary.
- A grantor trust files nothing in Colorado either; the grantor reports. A §645 combined return is one DR 0105 under the estate’s EIN.
- Residency: an estate is resident if the decedent was domiciled in Colorado at death; a trust is resident if it is administered in Colorado (C.R.S. 39-22-103(10)) check. A Colorado trust that names a Wyoming or Nevada trustee and moves its administration can stop being a Colorado resident trust; the beneficiaries still pay Colorado tax on what is distributed to them if they live here. Worth a conversation for a trust accumulating large gains for out-of-state beneficiaries; not worth it for a trust that distributes everything to Colorado residents.
Beneficiaries
- Resident beneficiaries report K-1 income on the DR 0104 as part of federal taxable income; no separate Colorado K-1 is needed, but the federal K-1 statement should identify the Colorado items.
- Nonresident beneficiaries owe Colorado tax only on Colorado-source income distributed to them — rents from Colorado real estate, income from a Colorado business — not on the trust’s interest and dividends. The fiduciary reports each nonresident beneficiary’s share on the DR 0105 and either the beneficiary files a nonresident DR 0104 or the fiduciary pays on the beneficiary’s behalf check.
- Out-of-state municipal interest: federally tax-exempt (K-1 box 14 code A) but a Colorado addition to the extent it is from obligations of other states. Ask the fiduciary for the fund’s state breakdown or the bond list.
- IRA income on a K-1 (box 5): the Colorado pension and annuity subtraction ($20,000 at 55–64, $24,000 at 65 and over, and the full amount of Social Security at 65 and over) is an individual subtraction; the trust itself cannot take it. Whether a beneficiary who receives inherited-IRA income through a trust K-1 may claim it as pension income is a DOR position to confirm check; the beneficiary who inherits the IRA directly clearly can, which is one more reason not to run an IRA through a trust without a reason.
The Colorado principal and income act
- Colorado adopted the Uniform Principal and Income Act (2000) with the 2008 amendments at C.R.S. 15-1-401 et seq.; the section numbers on the Three Incomes page map to it. Confirm whether Colorado has since enacted the 2018 Uniform Fiduciary Income and Principal Act, which replaces the power to adjust with a unitrust conversion framework and renumbers the sections check.
- Colorado’s probate code vests title to real property in devisees at death, subject to administration (C.R.S. 15-12-101). Whether rents during administration are the heirs’ income (Reg. §1.661(a)-2(e)) or the estate’s depends on who collects and controls them in practice; document it check.
- A beneficiary deed (C.R.S. 15-15-401 et seq.) passes Colorado real estate outside probate at death with a full §1014 step-up and no 1041 involvement; the grantee reports rents from the date of death.
No estate or inheritance tax
- Colorado’s estate tax was tied to the federal state death tax credit, which disappeared in 2005; no Colorado estate tax return has been required for deaths since. There is no inheritance tax and no gift tax. The federal 706 is the only transfer-tax return a Colorado estate files, and at a $15 million exemption most file none — or a portability return.
- Clients who moved from a state with an estate or inheritance tax (Iowa until 2025, Nebraska, Pennsylvania, Maryland, Oregon, Washington, Minnesota, Massachusetts, New York, Illinois) may still owe that state’s tax on real estate left there. Ask where the property is.
Private reference, not client advice. Notes taken from two continuing-education courses: Form 1041: A Practical Guide (Hadges & Zollars, Thomson Reuters Checkpoint Learning, 10 hours, written on 2019 law) and Taxation of Trusts, Estates, and Decedents (DeScherer & Rodda, CeriFi, 2025 printing on 2024 law). Figures and rules brought current to 2026 in October 2026 (P.L. 119-21, Rev. Proc. 2025-32, T.D. 9918). Items tagged check are to be confirmed against primary sources before they are relied on.