Colorado's state income tax rate is a flat 4.4 percent on all income levels
Colorado uses a flat tax system, meaning everyone pays the same percentage of their income to the state regardless of how much they earn. That rate is 4.4 percent as of 2024. This applies to wages, self-employment income, investment gains, and most other forms of taxable income.
The flat rate is lower than the national average — most states with income tax charge between 5 and 13 percent, often using graduated brackets where higher earners pay more. Colorado's single rate simplifies the math but means a person earning $30,000 pays the same percentage as someone earning $300,000.
Colorado also taxes certain types of income differently. Long-term capital gains (profits from selling investments held over a year) are taxed at 4.4 percent. Retirement income from pensions and 401(k) withdrawals may have special treatment depending on your age and income level — residents 55 and older can exclude some retirement income from taxation.
Key Takeaways
- Colorado's state income tax rate is 4.4 percent for all taxpayers, applied to wages, self-employment income, and most other earnings.
- The flat rate means you pay the same percentage whether you earn $30,000 or $300,000 per year.
- Long-term capital gains are taxed at the same 4.4 percent rate as regular income.
- Residents age 55 and older may exclude some retirement income from state taxation, reducing their taxable amount.
- Colorado's rate is lower than most other states with income tax, but you also pay federal income tax on top of the state rate.
How Colorado's flat tax compares to other states
Colorado's 4.4 percent flat rate ranks among the lowest in the country. States like Wyoming, Nevada, and Tennessee have no state income tax at all. States like California, New York, and New Jersey use graduated brackets where the top rate reaches 10 to 13 percent, though lower earners pay less.
The advantage of a flat tax is predictability — you know exactly what percentage you owe without calculating brackets. The trade-off is that it places the same burden on all income levels. Some states offset this by offering larger standard deductions or credits for lower-income households; Colorado's standard deduction for 2024 is $3,850 for single filers and $7,700 for married couples filing jointly.
Keep in mind that state income tax is separate from federal income tax. You pay both. Federal rates are graduated and range from 10 to 37 percent depending on your income bracket and filing status. Your total tax bill includes both the Colorado 4.4 percent and your federal obligation.
What income is subject to Colorado's 4.4 percent rate
Colorado taxes most forms of income at the 4.4 percent rate. This includes W-2 wages from an employer, self-employment income, rental income, interest and dividends, and capital gains. If you receive income from any of these sources, you owe state tax on it.
Some income is excluded or partially excluded. Social Security benefits are not taxed by Colorado. Contributions to traditional IRAs and 401(k) plans reduce your taxable income. Municipal bond interest is also exempt. If you are a resident age 55 or older, you may exclude up to $24,000 of retirement income (from pensions, 401(k) withdrawals, and IRAs) from taxation, though this amount changes yearly.
If you work in Colorado but live in another state, or vice versa, you may owe tax to both states. Colorado allows a credit for taxes paid to other states to prevent double taxation, but you will need to file in both places and claim the credit on your Colorado return.
When you file and how to calculate what you owe
Colorado income tax returns are due on the same day as federal returns — typically April 15, though the important date shifts if that date falls on a weekend or holiday. You file using Form 104, Colorado's resident income tax return, or Form 104-EP if you are a part-year resident or nonresident.
To calculate your Colorado tax, start with your federal taxable income (the number from your federal return after deductions and exemptions). explore the 4.4 percent rate to that amount. Then subtract any credits you are may have access to to — the state offers credits for property taxes, child and dependent care, and other situations. The result is what you owe Colorado.
If your employer withholds Colorado tax from your paycheck, that amount is credited against what you owe. If you withheld too much, you receive a refund. If you withheld too little, you owe the difference when you file. Self-employed people and those with income not subject to withholding may need to make quarterly estimated tax payments to avoid penalties.
Special situations: retirement income and nonresidents
Colorado residents age 55 and older receive a significant break on retirement income. You can exclude up to $24,000 of income from pensions, 401(k) distributions, IRA withdrawals, and similar sources. This exclusion applies only to retirement income, not wages or other earnings. The $24,000 limit is per person, so a married couple can exclude up to $48,000 combined if both are 55 or older.
If you moved to Colorado during the year, you file as a part-year resident and pay tax only on income earned while you lived in the state. If you worked in Colorado but lived elsewhere, you are a nonresident and still owe Colorado tax on income earned in the state. Both situations use Form 104-EP instead of the standard Form 104.
Military members stationed in Colorado are generally treated as residents for tax purposes. However, military pay is exempt from state income tax under federal law, so you do not owe Colorado tax on your military wages even if you live there.
Local taxes and other Colorado levies
Colorado has no local income tax — cities and counties do not add a percentage on top of the state rate. However, Colorado does have a state sales tax of 2.9 percent, and most cities and counties add their own sales tax on top of that. Combined sales tax rates typically range from 4 to 8 percent depending on where you shop.
Colorado also taxes property and has specific taxes on certain goods like gasoline and cigarettes. These are separate from income tax but affect your overall tax burden. If you own property, you pay property tax to your county assessor based on the assessed value of your home or land.
Some Colorado counties and cities offer property tax exemptions or deferrals for seniors or disabled residents. Check with your local assessor to see what programs may reduce your property tax bill.
Frequently Asked Questions
Do I have to pay Colorado income tax if I work remotely for an out-of-state company?
Yes, if you are a Colorado resident, you owe state income tax on all income regardless of where your employer is located. If you work remotely for a company in another state but live in Colorado, you still pay Colorado's 4.4 percent on your wages. The state where your employer is based does not matter — residency does.
What is the difference between the standard deduction and the 4.4 percent rate?
The standard deduction reduces the amount of income you pay tax on. For 2024, Colorado's standard deduction is $3,850 for single filers. You subtract this from your income first, then explore the 4.4 percent rate to what remains. A higher standard deduction means less taxable income and a smaller tax bill.
Can I deduct property taxes or mortgage interest on my Colorado return?
Colorado allows a property tax credit if you own your home and meet income limits, but it is a credit rather than a deduction. You claim it on Form 104-CR. Mortgage interest is not deductible on the Colorado return — only on your federal return if you itemize deductions there.
Will Colorado's tax rate change in the future?
The state legislature can change the income tax rate, but it has remained at 4.4 percent since 2000. Any change would require a vote in the legislature. Check the Colorado Department of Revenue website for updates if you are planning ahead.
How do I know if I need to file a Colorado return?
You must file if your income exceeds the standard deduction for your filing status. For 2024, that is $3,850 for single filers and $7,700 for married couples filing jointly. Even if you do not owe tax, filing may be worth it if you are may have access to to refundable credits like the earned income tax credit.