Colorado will not follow the IRS’ 100% Business Meal Deductions
Beginning in 2022, Colorado has decided not to follow the IRS’s business meal deductions. Under the CARES Act, the IRS made a temporary increase in deductibility of meal expenses from 50% to 100%. Colorado has said that any amount of meal expenses over 50% of the total expense must be added back to Colorado taxable income.
Colorado will cap Qualified Tuition Plan Contributions
For tax years beginning in 2022, the deduction for contributions to Colorado IRC Sec. 529 qualified tuition plans, previously unlimited, has been capped at $20,000 per year, per beneficiary for single taxpayers, and $30,000 for joint returns.
Beginning in 2023, the allowable deduction will be adjusted annually based on the average change in the cost of attendance. An annual reporting requirement from the state’s IRC Sec. 529 plan administrator to the Colorado Department of Revenue shall include contribution and distribution data for each account holder who is a Colorado taxpayer.
The individual income tax return already requires that beneficiary social security numbers be reported to claim a subtraction for contributions to 529 accounts. While convenient for the Department for audit purposes, the automatic reporting of account information to a government agency may prompt privacy concerns. The state appears to be preparing to pursue a similar disclosure effort on education savings accounts.