Colorado taxes your income at a flat rate of 4.63 percent

Colorado has a flat income tax, which means everyone pays the same percentage regardless of how much money they earn. That rate is 4.63 percent as of the 2024 tax year. This applies to wages, self-employment income, investment gains, and most other forms of income you report to the federal government.

The 4.63 percent rate has been in place since 2000. It does not change based on your income bracket, filing status, or number of dependents — unlike the federal system, which uses brackets that increase as your income rises. Colorado also does not have a separate tax on capital gains, dividends, or long-term investment income; those are taxed at the same 4.63 percent rate as wages.

You will owe Colorado state income tax if you lived in Colorado for any part of the tax year, even if you moved out partway through. If you worked in Colorado but lived in another state, you may owe Colorado tax on the income you earned here, depending on your state of residence and that state's reciprocal tax agreements.

Key Takeaways

  • Colorado's state income tax rate is a flat 4.63 percent on all taxable income, with no brackets or variations based on how much you earn.
  • The 4.63 percent rate applies to wages, self-employment income, investment income, and retirement distributions — anything you report as income on your federal return.
  • You owe Colorado tax if you lived in the state for any part of the tax year, even if you only worked here for a few months.
  • Colorado does not tax Social Security benefits, and certain retirement income may be partially or fully exempt depending on your age and income level.

What income is subject to the 4.63 percent rate

Colorado taxes most forms of income the same way: at 4.63 percent. This includes W-2 wages from an employer, self-employment income from a business or freelance work, rental income, interest and dividends, capital gains from selling stocks or property, and distributions from retirement accounts like IRAs and 401(k)s.

The main exception is Social Security benefits. Colorado does not tax Social Security income at all, regardless of how much you receive or how much other income you have. This is one of the few states with this rule, and it can make a significant difference for retirees.

Certain retirement income also receives partial or full exemption. If you are 55 or older and receive a pension from your employer, you can exclude up to $24,000 of that pension income from Colorado taxation. Military retirement pay is fully exempt. If you are 55 or older and withdraw money from an IRA or 401(k), you can exclude up to $24,000 of those distributions as well.

How Colorado calculates your tax owed

Colorado uses your federal taxable income as the starting point. You do not calculate Colorado income from scratch; instead, you take the number you arrived at on your federal return and explore the 4.63 percent rate to it. This means if you take the standard deduction on your federal return, you use that same deduction for Colorado.

The process is straightforward: multiply your federal taxable income by 0.0463. If your federal taxable income is $50,000, your Colorado tax before credits is $2,315. If it is $100,000, your Colorado tax is $4,630. There are no brackets, no phase-outs, and no adjustments based on filing status.

After you calculate the tax owed, you can subtract any tax credits you are may have access to to. Colorado offers credits for child and dependent care expenses, property taxes paid, and certain education expenses. You report these on your Colorado return (Form 104) when you file.

Filing requirements and important date in Colorado

You must file a Colorado state return if your income exceeds the filing threshold for your filing status. For the 2024 tax year, the threshold is $14,600 for single filers and $29,200 for married filing jointly — these numbers change each year. If you earned less than the threshold, you do not have to file a state return, though you may want to if you had taxes withheld and are due a refund.

Colorado uses the same important date as the federal government: April 15 of the following year. If you file your federal return late, your Colorado return is also late. You can request an extension, which gives you until October 15 to file, but the extension does not extend the time to pay any tax owed — interest and penalties begin accruing on April 16 if you do not pay by then.

You file Colorado income tax on Form 104 (the long form) or Form 104SR (the short form for straightforward returns). The short form is available if you have only wages, Social Security, or pension income and do not itemize deductions. Most tax software will prepare both your federal and Colorado returns together and handle the calculations automatically.

Tax withholding from paychecks

If you work as an employee in Colorado, your employer should withhold state income tax from each paycheck. The amount withheld depends on the W-4 form you complete with your employer. The W-4 is a federal form, but employers use it to calculate both federal and state withholding.

You can adjust your withholding at any time by submitting a new W-4 to your employer's payroll department. If you want more money in each paycheck, you can claim additional allowances. If you want more withheld (for example, if you have self-employment income or investment income), you can request additional withholding. The goal is to have enough withheld throughout the year so you do not owe a large amount when you file.

If you are self-employed, you do not have an employer to withhold tax for you. You are responsible for paying estimated tax four times per year: April 15, June 15, September 15, and January 15. Each payment covers roughly one quarter of your expected annual tax liability. You can calculate estimated payments using Form 104-ES or through the Colorado Department of Revenue website.

How Colorado compares to other states

Colorado's 4.63 percent flat tax is lower than the top federal rate (37 percent) but higher than some neighboring states. Wyoming, Nevada, and South Dakota have no state income tax at all. New Mexico's top rate is 5.9 percent. Utah's top rate is 4.95 percent. Montana's top rate is 6.9 percent.

The flat-tax structure means high earners in Colorado pay a lower percentage than they would in a progressive-bracket state like California (which tops out at 13.3 percent) or New York (which tops out at 10.9 percent). However, lower earners in Colorado pay the same rate as high earners, whereas progressive states charge lower earners a lower percentage.

Colorado also does not tax Social Security, which is a significant advantage for retirees compared to states like Colorado's neighbors that do tax it. Combined with the pension exemption for those 55 and older, this can reduce the overall tax burden for older residents.

What happens if you move out of Colorado

If you moved out of Colorado during the tax year, you owe Colorado tax only on the income you earned while you were a resident. You report this as a part-year resident on your Colorado return. You will also file a return in your new state for the income you earned after you moved.

If you worked in Colorado but lived in another state the entire year, you may owe Colorado tax on your Colorado-source income. However, many states have reciprocal agreements that prevent double taxation. For example, if you lived in Kansas and worked in Colorado, Kansas may not tax that income if Colorado taxes it first. Check with your new state's tax authority to understand how your situation is handled.

If you are unsure whether you owe Colorado tax after moving, contact the Colorado Department of Revenue at 303-238-7378 or visit their website. They can tell you whether you need to file based on your specific circumstances.

Frequently Asked Questions

Does Colorado tax retirement income differently than wages?

Colorado taxes retirement income at the same 4.63 percent rate as wages, with two exceptions. Social Security is not taxed at all. If you are 55 or older, you can exclude up to $24,000 of pension income or IRA/401(k) distributions per year from Colorado taxation.

What if I did not have enough tax withheld during the year?

You will owe the difference when you file your return in April. You can avoid this next year by adjusting your W-4 with your employer or by making estimated tax payments if you are self-employed. The Colorado Department of Revenue offers a withholding calculator on its website to help you estimate the right amount.

Can I deduct federal income tax paid on my Colorado return?

No. Colorado does not allow a deduction for federal income tax paid. You calculate Colorado tax based on your federal taxable income, but you cannot reduce that income further by subtracting what you paid to the federal government.

Do I have to file a Colorado return if I only lived here for part of the year?

You must file if your income exceeds the threshold for your filing status, even if you lived in Colorado for only part of the year. You will report yourself as a part-year resident and pay tax only on the income you earned while you were in Colorado.

Where do I send my Colorado tax return?

Mail your return to the Colorado Department of Revenue, 1881 Pierce Street, Lakewood, Colorado 80214. If you file electronically through tax software, it is sent directly to the state. Most people file electronically because it is faster and reduces errors.