Moving to the Rockies is a dream for a lot of people, but the "price of admission" usually involves a long, confusing look at the tax code. Honestly, if you're trying to figure out what is Colorado’s state income tax, you’re probably looking for a straight answer in a sea of legal jargon and political acronyms.
The short version? Colorado is a flat-tax state. That means whether you’re a barista in Boulder or a tech executive in Denver, the base percentage you pay is exactly the same. But like most things in life, there’s a "kinda" and a "sorta" attached to that simplicity. Between TABOR refunds and new 2025-2026 tax credits, what you actually write on that check to the Department of Revenue might surprise you.
The Magic Number: Colorado’s Current Tax Rate
Right now, for the 2025 tax year (the taxes you’re filing in early 2026), the Colorado state income tax rate is 4.4%.
It hasn't always been this way. For decades, the rate sat at 4.63%. Then it dropped to 4.55%, and eventually, thanks to voters passing Proposition 121, it landed at 4.4%. It’s one of the lower flat rates in the country, which is a big selling point for the state.
However, there’s a weird quirk you need to know about. Colorado has this thing called the Taxpayer’s Bill of Rights, or TABOR. If the state collects too much money in a year—more than the law allows them to keep—they have to give it back to us. Sometimes they do this through a temporary rate reduction. For example, in the 2024 tax year, the rate was slashed even further to 4.25% as a way to trigger those refunds.
For 2025, we are back at the "permanent" baseline of 4.4%.
Why a Flat Tax Isn’t Always "Flat"
While the rate is 4.4% of your Colorado taxable income, your "taxable income" isn't just your gross salary. Colorado starts with your Federal Taxable Income. This is a huge deal because it means Colorado essentially gives you the federal standard deduction for free.
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If the IRS says you don't owe tax on the first $15,000 you made because of the standard deduction, Colorado generally follows suit. You aren't paying 4.4% on every single dollar you earned from day one; you're paying it on what’s left after federal adjustments.
Who Actually Has to File?
Basically, if you lived here all year and had to file a federal return, you have to file a Colorado return. It’s pretty much a mirror image.
But it gets a little more nuanced if you’re just passing through.
- Full-Year Residents: You lived here Jan 1 through Dec 31.
- Part-Year Residents: You moved here mid-year or left for good in July. You only pay Colorado tax on the money you earned while you were physically living in the state.
- Non-Residents: You live in Nebraska but own a rental property in Fort Collins. You owe Colorado tax only on that rental income.
If you're a resident, even if you don't think you owe anything, you should probably file anyway. Why? Because of the TABOR refund. If you don't file, the state won't know where to send your check.
The TABOR Refund: Colorado’s Unique "Gift"
You’ve probably heard people talking about "getting their TABOR check." This is uniquely Colorado.
For the 2025 tax year (filing in 2026), the refund mechanism is expected to look a bit different than the flat $800 checks we saw a couple of years ago. The state is moving back toward a "tiered" system based on your income levels.
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| If your income is... | Single Filers get roughly... | Joint Filers get roughly... |
|---|---|---|
| Under $52,000 | $19 | $38 |
| $52,001 – $105,000 | $25 | $50 |
| $105,001 – $168,000 | $29 | $58 |
| Over $299,000 | $59 | $118 |
Note: These are estimates based on current revenue projections for the 2025 fiscal year. The exact amounts are finalized by the Department of Revenue late in the year.
Wait, why so small? In 2024 and 2025, the state used a massive chunk of the surplus to fund property tax relief and a temporary income tax rate cut. So, while your "check" might be smaller, you likely saved more throughout the year because the 4.4% (or 4.25% previously) kept more money in your paycheck to begin with.
New Credits You Can’t Ignore in 2026
Colorado has become very aggressive with tax credits lately. They’ve moved away from "subtractions" (which just lower your taxable income) to "refundable credits" (which are basically cash in your pocket).
The Family Affordability Tax Credit
This is a big one for parents. Starting in 2025, this credit provides significant relief for families with children under age 17. Depending on your income, you could see up to $3,200 per child under age 6. If your kids are between 6 and 16, it’s up to $2,400.
The catch? It phases out pretty quickly. If you're a single filer making over $75,000, or joint filers making over $85,000, the amount starts to drop.
The Earned Income Tax Credit (EITC)
Colorado’s state EITC is now pegged at 50% of the federal credit. This is a massive jump from where it was a few years ago. If the IRS gives you a $2,000 credit, Colorado hands you another $1,000. It’s one of the most effective ways the state supports low-to-moderate-income workers.
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Common Misconceptions About Colorado Taxes
A lot of people think that because we have a flat tax, we don't have "loopholes." Not true.
One of the weirdest things about Colorado tax is how we handle Social Security. If you’re 65 or older, Colorado generally lets you subtract your Social Security income from your taxable total. It makes the state very attractive for retirees.
Another one? 529 College Savings plans. You can deduct the full amount of your contributions to a CollegeInvest account from your Colorado taxable income. Most states cap this at $5,000 or $10,000. Colorado doesn't. If you put $20,000 away for your kid's college, you don't pay that 4.4% on any of that $20,000.
Local Taxes: The "Hidden" Cost
Don't get tunnel vision on the 4.4% state rate.
Colorado allows some cities to collect their own "Occupational Privilege Taxes," often called "Head Taxes." If you work in Denver, Aurora, or Greenwood Village, you might see a few dollars snatched out of your paycheck every month regardless of what the state rate is. It’s usually a flat fee—like $5.75 a month—but it surprises people when they see an extra line item on their paystub.
How to File Without Losing Your Mind
The state’s official portal is called Revenue Online. It’s... okay. It’s free, which is the best part. But if you have a complicated situation (like a business or out-of-state rental income), most people still stick with things like TurboTax or H&R Block.
The deadline is almost always April 15. Colorado is pretty chill with extensions—they give you an automatic six-month extension to file until October 15. But—and this is a huge "but"—you still have to pay by April 15. If you owe money and wait until October to send the check, they’ll hit you with interest and penalties.
Actionable Steps for Your 2026 Filing
- Check your residency status: If you moved here in 2025, grab your old lease or closing documents to find the exact date you became a "resident." You'll need it for Form DR 0104PN.
- Gather 529 Records: If you contributed to a CollegeInvest account, find those statements. It’s one of the easiest ways to lower your bill.
- Look at your Child Tax Credit eligibility: If you have kids under 6, make sure you're looking at the new Family Affordability Tax Credit. It’s a game-changer for 2025-2026.
- File even if you owe $0: Seriously. If there is a TABOR refund surplus, filing is the only way to ensure the state has your current address and bank info to send you that money.
Colorado's tax system is definitely a "what you see is what you get" situation on the surface, but the real savings are buried in those specific state credits. Keep an eye on the news around November—that's usually when the final TABOR refund amounts are locked in based on the state's fiscal year-end numbers.