Colorado charges a flat 4.4% income tax on most wages and investment income

Colorado's state income tax is a flat rate of 4.4%, meaning everyone pays the same percentage regardless of how much they earn. This applies to wages, salaries, interest, dividends, and most other income sources. The rate has been 4.4% since 2000 and does not change based on your income bracket — unlike federal income tax, which uses progressive brackets.

The 4.4% rate is one of the lowest in the country. You pay it on top of federal income tax, not instead of it. Colorado does not have a separate local income tax in most areas, though a few municipalities have added small additional taxes in recent years.

Key Takeaways

  • Colorado's state income tax rate is 4.4% for all residents, applied equally to wages, investment income, and most other earnings.
  • You owe Colorado income tax if you lived in the state for any part of the year, even if you moved away partway through.
  • Certain types of income — including Social Security benefits, some retirement distributions, and military pay — are partially or fully exempt from Colorado state tax.
  • Your employer withholds Colorado income tax from your paycheck if you work in the state, but you may owe additional tax or receive a refund when you file your return.
  • Colorado allows you to claim a standard deduction or itemize deductions, which reduces the income amount subject to the 4.4% tax.

Who owes Colorado income tax

You owe Colorado state income tax if you were a resident of Colorado for any part of the tax year. Residency means you lived in the state, even if you moved away later in the year or only spent part of the year there. If you worked in Colorado but lived in another state, you may owe Colorado tax on income earned in the state, depending on your employer's location and your work arrangement.

Non-residents who earned income in Colorado — such as contractors or remote workers — may also owe tax on that Colorado-source income. The rules depend on where your employer is located and whether you performed the work in Colorado. If you are unsure whether you owe Colorado tax, the Colorado Department of Revenue website lists residency rules by situation.

Income that is exempt or partially exempt from Colorado tax

Not all income is taxed at the 4.4% rate. Social Security benefits are fully exempt from Colorado state income tax. Military retirement pay and certain other military income are also exempt. If you receive a pension from the federal government, state government, or local government, you may be able to exclude some or all of it from Colorado taxable income, depending on when you earned it and your age.

Long-term capital gains — profits from selling stocks or property you held for more than a year — receive special treatment. Colorado taxes long-term capital gains at a lower rate than ordinary income in some cases, though the rules are complex and depend on your total income. Distributions from certain retirement accounts, such as traditional IRAs and 401(k)s, are taxed as ordinary income at the 4.4% rate. Roth IRA withdrawals are generally not taxed.

How Colorado income tax is withheld from paychecks

If you work in Colorado, your employer withholds state income tax from your paycheck based on the W-4 form you complete. The amount withheld depends on your filing status, the number of dependents you claim, and any additional withholding you request. Your employer sends the withheld amount to the Colorado Department of Revenue on your behalf.

The withholding is an estimate. When you file your Colorado income tax return, you may discover you had too much withheld — in which case you receive a refund — or too little, meaning you owe additional tax. If you change jobs, get married, have a child, or have a major life change, you should update your W-4 to adjust your withholding. You can also request additional withholding if you know you will owe tax.

Colorado standard deduction and deductions

Colorado allows you to reduce your taxable income by claiming either a standard deduction or itemizing deductions. The standard deduction amount changes each year and depends on your filing status — single, married filing jointly, head of household, and so on. For the 2024 tax year, the Colorado standard deduction ranges from around $3,900 for single filers to $7,800 for married couples filing jointly, though these amounts are adjusted annually for inflation.

If you itemize deductions instead, you list specific expenses such as mortgage interest, property taxes, charitable donations, and medical expenses. You can only deduct the amount that exceeds a threshold set by Colorado. Most people use the standard deduction because it is simpler and often results in a larger deduction. You cannot claim both the standard deduction and itemized deductions in the same year.

Filing your Colorado income tax return

Colorado residents file a state income tax return using Form 104, the Colorado Individual Income Tax Return. The deadline is the same as the federal deadline — usually April 15 of the following year. You must file if your income exceeds the filing threshold for your situation, which is generally higher than the standard deduction. If you file your federal return, you should also file a Colorado return if you owe state tax.

You can file online using Colorado Department of Revenue-approved software, by mail, or through a tax professional. If you expect a refund, filing early can speed up the process. If you cannot file by April 15, you can request an extension, which gives you until October 15 to file. An extension does not extend the deadline to pay taxes owed — you should pay by April 15 to avoid penalties and interest.

Frequently Asked Questions

Do I owe Colorado income tax if I moved out of state partway through the year?

Yes, you owe Colorado income tax on income earned while you were a resident. If you moved out of state on June 30, you owe tax on income earned from January 1 through June 30. You may also owe tax to the new state on income earned after you moved. File a Colorado return for the part of the year you lived there and a return in your new state for the remainder.

Is my military retirement pay taxed in Colorado?

Military retirement pay is exempt from Colorado state income tax. Other military income, such as active-duty pay, may be taxed depending on your residency status. If you are a Colorado resident receiving military pay, check the Colorado Department of Revenue website or speak with a tax professional to determine what portion of your income is exempt.

What happens if I do not file a Colorado income tax return?

If you owe Colorado income tax and do not file, the state may assess penalties and interest on the unpaid amount. The longer the debt goes unpaid, the larger the total becomes. If you owe a significant amount, Colorado may place a lien on your property or garnish your wages. If you have not filed in past years, you can still file late returns, though penalties apply.

Can I claim dependents on my Colorado return?

Yes, you can claim dependents on your Colorado return if they meet the IRS definition of a dependent. Each dependent reduces your taxable income. The number of dependents you claim also affects your withholding on your W-4. If your dependent status changes during the year, update your W-4 to adjust your withholding.