CO HB1192

Allows Colorado taxpayers to use 529 plan distributions to pay principal or interest on qualified education loans, up to $10,000 per year, beginning with tax year 2022, while maintaining the state income tax deduction for 529 contributions.

Aligns Colorado state law with federal law under Section 529(c)(9) of the Internal Revenue Code, which permitted qualified education loan payments as eligible expenses in 2019.

Requires taxpayers to avoid tax recapture of the state deduction when distributions are used for the new qualified education loan payment purpose, in addition to existing permitted uses like qualified higher education expenses, death, disability, or scholarships.

Mandates collegeinvest to provide the Department of Revenue with annual secure electronic reports beginning January 1, 2023, containing account owner and contributor information needed to administer the deduction.

Takes effect 90 days after final adjournment unless a referendum petition is filed, in which case it requires voter approval at the November 2022 general election.