Colorado Military Income & Retirement Tax Exemptions for Veterans
Last reviewed: July 2026
Quick Answer
Colorado allows eligible military retirees to exclude their military retirement pay from state income tax. This exemption applies to pension income earned from the U.S. military only, not other forms of military compensation. Surviving spouses of deceased military retirees may also claim this benefit. The exemption is claimed directly on your Colorado state income tax return using Form DR 0104, with no separate application process required.
Key Facts
- •Colorado veterans can exclude military retirement pay from state income tax.
- •Only military retirement income qualifies; other military pay is not exempt.
- •Surviving spouses of deceased retirees may also claim the exemption.
- •File with Form DR 0104 to claim the exemption on your state return.
- •No separate application needed; claim the deduction on your annual tax return.
Federal Eligibility Requirements
To qualify for Colorado's military retirement pay exemption, you must be receiving retirement pay from the U.S. military. This includes retirement income from the Army, Navy, Air Force, Marine Corps, Coast Guard, Space Force, or National Guard when serving in a federal capacity. The exemption is not limited by service-connected disability status or discharge date—any veteran receiving military retirement pension payments can claim it.
Military retirement pay means income received as a retiree who served on active duty and earned a military pension. Survivorship Benefit Plan (SBP) payments made to surviving spouses and beneficiaries also qualify for this exemption under C.R.S. § 39-22-105. The exemption does not apply to disability compensation from the VA, which is already federally tax-exempt.
There are no income limits or asset limitations for claiming this benefit. Any Colorado resident or domiciliary receiving military retirement pay may claim the exemption. Spouses must be the surviving beneficiary of a deceased military retiree to qualify. The exemption applies indefinitely for as long as you receive eligible military retirement income and maintain Colorado residency or domiciliary status.
Service connection or disability rating is not required to claim this exemption. Whether you served during wartime, peacetime, or any era, military retirement pay qualifies. Reservists and National Guard members who earned military retirement after 20+ years of service qualify equally with active-duty retirees.
Benefit Amounts
This is a state tax benefit only; there is no federal dollar amount. Colorado state income tax rates for 2024 range from 4.40% to 5.55% depending on filing status and taxable income. The actual tax savings depend on your individual military retirement income and Colorado tax bracket. Military retirees in higher income brackets save proportionally more through this exemption. For example, a retiree receiving $40,000 in annual military retirement pay could save approximately $1,760–$2,220 annually in Colorado state income tax.
Colorado Benefits on Top of Federal
Colorado is one of fewer than half of U.S. states offering a military retirement pay exemption, making it a significant benefit for military retirees choosing to live in the state. The exemption under C.R.S. § 39-22-104(1)(l) excludes 100% of military retirement pay from Colorado state income tax calculation, not just a portion or dollar cap.
The exemption stacks cleanly with federal tax treatment—military retirement pay is already excluded from federal taxable income under 26 U.S.C. § 402, and Colorado honors this federal exclusion while applying its own additional state exemption. This means military retirees receive both federal and state tax relief on the same income stream.
Surviving spouses and beneficiaries receiving Survivor Benefit Plan (SBP) payments or military survivor annuities also qualify under Colorado law. A widow or widower receiving SBP payments from their deceased military spouse's retirement can claim the same exemption. This recognizes that SBP is a continuation of military retirement income earned during active service.
Colorado does not impose separate documentation requirements beyond standard tax return filing. Unlike some states requiring military discharge papers or retirement accounts statements, Colorado requires only that you claim the exemption on Form DR 0104 attached to your tax return. No pre-approval letter or registration with the Department of Revenue is necessary. The benefit applies automatically upon claiming it with the correct form.
100% exemption of all military retirement income from Colorado state income tax; no dollar cap or limitation.
How to Apply
Federal VA Application
There is no federal application process for Colorado's state military tax exemption. This is a state-only benefit administered by Colorado, not the VA or federal government. However, to qualify, you must first establish your military retirement status through your military service branch. If you are already receiving military retirement pay deposited to your account, you have established eligibility.
To claim the exemption on your Colorado state income tax return, download Form DR 0104 (Colorado Adjustments to Federal Taxable Income) from the Colorado Department of Revenue website at tax.colorado.gov. This form is filed as a schedule with your Form 104 (Colorado Individual Income Tax Return). You do not file this with the VA—only with Colorado's tax authorities.
On Form DR 0104, enter your military retirement income in the designated line (typically Line 5 or the military retirement deduction section). Attach documentation showing your military retirement status, such as a 1099-R from the military finance center showing 'military retirement' as the income source, or a letter from your military service branch confirming your retired status. Your LES (Leave and Earnings Statement) or recent military retirement payment stub also serves as acceptable proof.
File Form DR 0104 with your annual Colorado Form 104 return by April 15 (or the next business day if April 15 falls on a weekend). You may file electronically through Colorado's free tax software or paper filing. Processing typically takes 4–8 weeks after the return is filed. Check your refund status through the Department of Revenue's website using your Social Security number and return confirmation number.
State Application
Colorado's military retirement tax exemption is claimed through the Colorado Department of Revenue as part of your annual state income tax filing. Visit the official website at tax.colorado.gov to access all forms and instructions. The primary form is Form DR 0104 (Colorado Adjustments to Federal Taxable Income), available as a PDF download with full instructions.
You may file your Colorado tax return through multiple methods: electronically using approved tax software (available free through Colorado's Free File program if income-qualified), or by mailing a paper Form 104 and Form DR 0104 to the Colorado Department of Revenue, Denver, Colorado. Electronic filing is faster and allows you to check status online.
Required documents include proof of military retirement status. Acceptable documentation includes: a 1099-R issued by your military finance center (Army Finance, Navy Finance, Air Force Finance, etc.) clearly labeled as military retirement income; a letter from your military service branch confirming retired status; or your most recent military retirement payment stub showing ongoing pension deposits. No original documents need to be submitted with the return—keep copies for your records.
Processing typically takes 4–8 weeks for paper returns and 1–3 weeks for electronic filing. You can check your refund or return status through the Department of Revenue's website by entering your Social Security number and return confirmation number. If you have questions, contact the Colorado Department of Revenue's taxpayer service line at 303-238-TAXCO (8296).
County veterans service officers can assist you in locating documentation and understanding the exemption, though they do not process the actual tax claim. Contact your county veterans service office for help gathering military records.
Common Reasons for Denial
The most common reason claims for Colorado's military retirement tax exemption are denied is failure to properly document military retirement status. The Department of Revenue requires clear proof that income is from military retirement, not other military pay. If you submit a return claiming the deduction without any supporting documentation, the exemption will likely be denied and you will owe the full state tax on that income.
Another frequent denial occurs when veterans confuse military retirement pay with VA disability compensation. VA disability payments are already federally tax-exempt and do not need Colorado's exemption. However, if you claim the exemption on disability income instead of retirement income, the claim will be denied because disability compensation does not qualify. The exemption applies only to pension payments from active-duty military service.
Incorrect form completion or missing Form DR 0104 entirely causes many denials. Veterans who file only Form 104 without attaching the required deduction form will not receive the exemption. The Department of Revenue cannot automatically apply deductions not claimed on the appropriate schedule. Ensure Form DR 0104 is completed and filed with your main return.
Surviving spouses sometimes are denied because they fail to provide documentation of their spouse's military retirement status or proof that they are the legal beneficiary receiving SBP or survivor annuity payments. A copy of the death certificate and military survivor annuity statement from the finance center are essential for spousal claims.
To strengthen your initial claim, attach your military retirement account statement or 1099-R showing the exact amount of retirement income, a letter from your military service branch confirming retired status, and if applicable, your Survivor Benefit Plan election notice. Keep all documentation with your tax files for at least seven years in case of audit.
If You Are Denied: The Appeals Process
If Colorado denies your military retirement tax exemption claim, you have three appeal options available through the Colorado Department of Revenue: the administrative appeal process, the Tax Court appeal, or federal court as a last resort.
The first step is filing a written protest with the Department of Revenue within 30 days of receiving the denial letter. This protest must detail why you believe the exemption should apply, including your military retirement documentation. Submit it to the Department of Revenue's Appeals Section. This is the simplest and fastest option for fixing documentation errors or missing forms. Many denials are overturned at this stage when proper documentation is provided.
If the Department upholds the denial on protest, you may file an appeal to the Colorado State Board of Tax Appeals within 60 days of that decision. This board conducts an independent review of your claim and holds a hearing where you can present evidence of your military retirement status. Legal representation is not required but is permitted. The board makes a final administrative decision, usually within 90–120 days of filing.
If you disagree with the Board's decision, you may appeal to Colorado District Court (Tax Court division) within 30 days. This requires legal filing fees and typically involves an attorney, though self-representation is allowed. Tax Court decisions can be appealed further to the Colorado Court of Appeals and ultimately the Colorado Supreme Court, though such appeals are rare for individual tax disputes.
Free help is available through Colorado Legal Services (for low-income veterans), your county veterans service officer, and the Colorado Department of Veterans Affairs. The VA Office of Inspector General also provides free veterans advocacy in some situations. No veteran should pay a private tax preparer for appeals assistance—free resources are available.
For help understanding your military retirement documents or navigating Colorado's tax system, contact your county veterans service officer for free assistance. The Colorado Department of Veterans Affairs also offers free resources at veterans.colorado.gov. Both organizations provide guidance at no cost—never pay a private tax service for help claiming this exemption.
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Frequently Asked Questions
Do I need to be service-connected disabled to claim Colorado's military tax exemption?
No. The military retirement tax exemption in Colorado is available to all military retirees receiving retirement pension income, regardless of service-connection status or disability rating. You do not need to file a VA disability claim or have a disability rating—only military retirement pay income. This makes it different from many other veterans benefits that require disability ratings. If you spent 20+ years on active duty and earned a military pension, you qualify for this exemption even if you have zero percent disability rating. The exemption applies equally to all retirees.
Does VA disability compensation qualify for Colorado's military tax exemption?
No. VA disability compensation does not qualify for Colorado's military retirement tax exemption because it is already federally tax-exempt under 38 U.S.C. § 111. VA disability payments are not taxed by Colorado, the federal government, or any state. The Colorado exemption applies only to military retirement pension payments earned through active-duty service and paid by the military finance centers. If your only military income is VA disability, you do not need Colorado's exemption—you already pay zero state tax. Confusing these two income sources is a common reason claims are denied.
Can my surviving spouse claim the exemption after I pass away?
Yes. Surviving spouses and beneficiaries receiving Survivor Benefit Plan (SBP) payments or military survivor annuities from a deceased military retiree can claim Colorado's military retirement tax exemption. The exemption applies to all SBP payments made to survivors under C.R.S. § 39-22-105. Your widow, widower, or designated beneficiary should file Form DR 0104 with their Colorado tax return, attaching proof of the SBP election notice and the deceased retiree's military discharge papers or retirement letter. The surviving spouse's income limits do not affect eligibility. This benefit continues for the lifetime of the SBP beneficiary.
What documentation must I attach to my Colorado tax return to claim the exemption?
At minimum, you must attach proof that the income is military retirement. Acceptable documentation includes a 1099-R from your military finance center clearly labeled as military retirement income, a letter from your military service branch (Army, Navy, Air Force, Marine Corps, Coast Guard, Space Force, or National Guard) confirming your retired status, a military retirement account statement, or your most recent military retirement payment stub. You do not need to submit original discharge papers, but you may include a copy of your DD Form 214. The Colorado Department of Revenue does not require pre-approval—submit documentation with Form DR 0104 when you file your return. Keep copies for seven years in case of audit.
If I move out of Colorado, do I lose the exemption?
Yes. The military retirement tax exemption applies only to Colorado residents and domiciliaries (those with Colorado domicile status). If you move to another state, you can no longer claim Colorado's exemption on your Colorado return. However, many other states offer their own military retirement exemptions—check your new state's tax laws. If you maintain Colorado domicile (for example, keeping a home in Colorado while working elsewhere temporarily), you may still claim the exemption. Once you establish domicile in another state by obtaining a new state ID, registering to vote there, or filing a tax return there, Colorado considers you non-resident and the exemption no longer applies to you.
Related Benefits in Colorado
Sources & References
- C.R.S. § 39-22-104(1)(l) — Establishes military retirement pay exemption from Colorado income tax
- Colorado Department of Revenue Reg. 39-22-104 — Specifies eligibility requirements and documentation for the exemption
- C.R.S. § 39-22-105 — Describes surviving spouse eligibility for military retirement exemption
VA benefit rules and state programmes change. Verify at va.gov or with a free Veterans Service Officer.
Editorial standards: This guide is reviewed against primary government sources and cites 3 statutes. Last reviewed July 2026. Scheduled for re-verification by July 2027.
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