THE FEDERAL EXCLUSION FOLLOWS THE OWNER. COLORADO TAXES GAIN ON COLORADO PROPERTY.

The IRS says an owner may exclude up to $250,000 of gain from income, or up to $500,000 on a joint return, if the owner owned the home for at least 24 months out of the last 5 years and used it as a main home for the same period, and has not used the exclusion on another home in the prior two years (IRS Topic 701, VERIFIED). Publication 523 says a period after 2008 during which the property was not used as a principal residence is nonqualified use of that property, which can reduce the exclusion (IRS Publication 523, VERIFIED).

The Colorado statute counts income from the ownership of any interest in real or tangible personal property in Colorado as Colorado-source income for a nonresident (C.R.S. 39-22-109, VERIFIED). A nonresident reports it on a Colorado individual income tax return (PROBABLE, from a search summary; the Department of Revenue page returned an error), and what was withheld at closing is credited against the liability (PROBABLE, from a title company explainer).

FIRPTA withholding applies when a foreign person sells a U.S. real property interest, generally at 15 percent (IRS, VERIFIED). It does not apply to a U.S. citizen or resident who lives in another state, which is the more common case for an out-of-state Colorado owner.