Colorado taxes individual income at a flat 4.4%, the rate in effect for 2025 and the rate used in the state's 2026 estimated tax worksheet. The calculation starts with your federal taxable income, then applies Colorado additions and subtractions, such as the subtraction for Social Security and pension income.
If you live in Denver, your Colorado income tax is simpler than your federal tax in one way and trickier in another. The rate is flat, so there are no brackets to track. But the starting point, the additions and subtractions, and the occasional TABOR refund all have rules worth understanding, especially if you are retired, own a business or moved during the year.
What is Colorado’s income tax rate?
Colorado taxes individual income at a single flat rate. The Department of Revenue’s 2025 individual income tax booklet uses 4.4%, and the state’s 2026 estimated tax worksheet also figures tax at 4.4%.
The rate can drop temporarily. Under Colorado’s Taxpayer’s Bill of Rights, known as TABOR, revenue above a constitutional limit has to be refunded, and one way the state does that is a one-year rate cut, as described on the Department’s TABOR refund page. For 2024, the rate was 4.25%.
How is Colorado taxable income calculated?
Colorado begins with your federal taxable income, the figure after your federal standard or itemized deduction. That is a common point of confusion. Colorado does not offer a separate standard deduction, because your federal deduction has already been taken by the time Colorado’s calculation begins.
From there, Colorado adds certain items back and lets you subtract others. Using the 2025 booklet as the guide, these are the ones that affect Denver households most often.
Common additions
- State income tax addback. If you itemized federally and deducted state income tax, Colorado generally makes you add it back, subject to limits.
- High-income deduction addback. If your adjusted gross income exceeds $300,000, you add back the part of your federal standard or itemized deduction above $12,000 ($16,000 for joint filers), reduced by any state income tax already added back.
- Qualified business income addback. If your AGI exceeds $500,000 ($1,000,000 for joint filers), you add back the entire federal qualified business income deduction.
Common subtractions
- Social Security. Taxpayers 65 and older may subtract all taxable Social Security. Those 55 to 64 may subtract all of it if AGI is $75,000 or less ($95,000 joint), or up to $20,000 if it is higher.
- Pensions and annuities. Taxpayers 65 and older may subtract up to $24,000, and those 55 to 64 up to $20,000, in each case reduced by the Social Security they subtracted.
- Military retirement. Taxpayers 54 or younger may subtract the lesser of $15,000 or their taxable military retirement benefits.
- U.S. government interest. Interest on U.S. government bonds and Treasury bills that was included in federal taxable income comes back out.
An example: a retiree in Denver
Consider a single Denver retiree, age 67, with federal taxable income of $70,000. That includes $25,000 of taxable Social Security and $30,000 of IRA distributions. The numbers are illustrative.
She subtracts all $25,000 of Social Security. Her pension and annuity subtraction is capped at $24,000 minus the Social Security she already subtracted, so in her case it is zero. Her Colorado taxable income is $45,000, and at 4.4% her Colorado tax is $1,980. Without the subtraction she would owe $3,080.
The lesson is that the two retirement subtractions share one limit for most people. Someone with less Social Security, or none yet, gets more room for pension and IRA income. That interplay is worth modeling before deciding when to start Social Security or how much to draw from an IRA each year.
How does the TABOR refund work?
When the state collects more than TABOR allows, the surplus goes back to taxpayers. In years with a large enough surplus, part of it comes as a sales tax refund claimed on your Colorado return, in tiers based on income. To claim it for 2025, the booklet says you generally must have been a full-year resident, 18 or older on January 1, 2025, and have filed by October 15, 2026. The refund is applied first to any Colorado tax you owe and can be intercepted for other state or IRS debts.
Whether a refund exists for 2026, and how large it is, will not be known until the state closes its books. Do not count on it when planning cash flow.
What if I moved, or work across state lines?
Colorado taxes full-year residents on all income, part-year residents on income earned while living here plus Colorado-source income, and nonresidents only on Colorado-source income, according to the Colorado Individual Income Tax Guide. If you moved during 2026, you will likely file part-year returns in two states. If you live in Colorado and earn income taxed by another state, Colorado offers a credit for tax paid to the other state so the same income is not fully taxed twice.
Do I need to make Colorado estimated payments?
If you have self-employment, rental or investment income without withholding, probably. The DR 0104EP worksheet requires estimated payments if you expect to owe more than $1,000 in net Colorado tax for 2026. The 2026 due dates are April 15, June 15 and September 15, 2026, and January 15, 2027.
You avoid an underpayment penalty by paying the smallest of three amounts through withholding and estimates: 70% of your 2026 Colorado tax, 100% of your 2025 tax if your 2025 federal AGI was $150,000 or less, or 110% of your 2025 tax. Notice that Colorado’s current-year test is 70%, lower than the federal 90%.
How do business owners use Colorado’s SALT workaround?
If you own part of a partnership or S corporation, the business can elect under Colorado’s SALT Parity Act to pay Colorado income tax at the entity level. You then claim a credit on your personal return for your share. The federal cap on state and local tax deductions rose to $40,400 for 2026, according to the IRS correction to the 2026 Form 1040-ES, but it shrinks once income passes $505,000, which is where the election can matter most.
Putting it together
A useful habit is to look at your Colorado return as three lines rather than one: federal taxable income, Colorado adjustments and the 4.4% tax. Most planning happens in the middle line, through retirement income timing, business elections and residency. If you would like a second set of eyes on yours, our tax planning and preparation team works through these questions with Denver households every year.
Common questions
What is Colorado's income tax rate?
Colorado uses a flat rate of 4.4% for individuals, the rate in effect for 2025 and the rate in the Department of Revenue's 2026 estimated tax worksheet. A state revenue surplus under TABOR can temporarily lower the rate for a single year.
Does Colorado have its own standard deduction?
Not separately. Colorado starts with federal taxable income, which already reflects your federal standard or itemized deduction. Higher-income taxpayers may have to add back part of that deduction.
Is Social Security taxed in Colorado?
For 2025 returns, taxpayers 65 and older can subtract all of their taxable Social Security. Taxpayers 55 to 64 can subtract all of it if their adjusted gross income is $75,000 or less ($95,000 for joint filers), and up to $20,000 otherwise.
When is my 2026 Colorado return due?
April 15, 2027. Colorado grants an automatic extension to file until October 15, 2027, but no extension to pay, so tax owed is still due in April.
Do I need to make Colorado estimated payments?
You must if you expect to owe more than $1,000 in net Colorado tax for 2026 after withholding and credits. The 2026 payments are due April 15, June 15 and September 15, 2026, and January 15, 2027.
Who gets the TABOR refund?
Generally, full-year Colorado residents who were 18 or older at the start of the year and file a return by the October deadline. The amount, and whether there is a refund at all, depends on the state's revenue for that year.