Living in Colorado usually means you're trading high humidity for high altitudes, but when it comes to the IRS’s state-level cousins, the math gets a little funky. Honestly, if you’re trying to figure out what is the tax rate for Colorado, you’ve probably realized it's not just one number you can highlight and forget. It’s a mix of a flat income tax, a surprisingly low state sales tax that explodes once the city gets its hands on it, and property taxes that are currently in a state of "legislative flux," to put it mildly.
Whether you're moving to the Front Range or you've been here since the Broncos played at Mile High, 2026 brings some specific shifts you should know about.
The Flat Income Tax Reality
Colorado is one of those states that likes to keep things "simple" with a flat tax. Instead of the progressive brackets you see on your federal return—where you pay more as you earn more—Colorado charges everyone the same percentage.
For the 2025 tax year (the ones you’re filing right now in early 2026), the state income tax rate is 4.4%.
Now, there was a bit of a tease back in 2024 where the rate dropped to 4.25% because the state had too much cash in its pockets. That’s thanks to the Taxpayer’s Bill of Rights, or TABOR. Basically, if the state collects more than a certain amount, they have to give it back. But for this filing season, don't count on that extra-low 4.25%. The state's excess revenue for the last fiscal year didn't quite hit the $300 million threshold needed to trigger that specific rate reduction. So, 4.4% is your baseline.
Wait, there's more. If you’re a high earner—we’re talking over $300,000—you might have to "add back" some of your federal deductions, which effectively bumps your bill. On the flip side, lower-income families are seeing a massive boost from the state’s Earned Income Tax Credit (COEITC), which is now worth 50% of the federal credit.
Sales Tax: The Great Colorado Bait-and-Switch
If you look at the state-level sales tax, you’d think Colorado is a bargain hunter’s paradise. At 2.9%, it’s one of the lowest in the entire country. But then you go to buy a toaster in Denver or a pair of skis in Aspen, and your receipt shows 8%, 9%, or even 10%.
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What gives?
It’s the "stacking" effect. Your total tax at the register is a layer cake of different jurisdictions:
- The State of Colorado (2.9%)
- The County (like Arapahoe or Jefferson)
- The City (Denver, Aurora, Boulder)
- Special Districts (RTD for the bus/train, or the Scientific and Cultural Facilities District)
In places like Denver, the combined rate sits around 9.15%. If you head up to the mountains, it can climb even higher. In Winter Park, for example, you might see rates hitting double digits. Honestly, it makes the "2.9%" headline feel like a bit of a prank. Also, a big change for 2026: retailers can no longer keep a "service fee" (a tiny slice of the tax they collect) for the state portion. That money now stays with the state to fund various programs.
Property Taxes: The 2026 Rollercoaster
Property taxes in Colorado are weird because we don't tax the "market value" directly. We use an "assessment rate." Basically, the county takes what your house is worth, multiplies it by a small percentage (the assessment rate), and then applies the "mill levy" (the local tax rate).
For the 2026 tax year, things are shifting because of Senate Bill 24-233.
- Residential Rate: The assessment rate for local government stuff is roughly 6.8%.
- School District Rate: This is slightly different, usually around 7.05%.
- The "Discount": For 2026, you get to shave 10% off the first $700,000 of your home's value before they even start the math.
It sounds like a lot of jargon, but it basically means that while home values in Fort Collins or Colorado Springs are sky-high, the actual tax bill is usually lower than what you'd see in the Midwest or the Northeast.
TABOR Refunds: Why 2026 feels "Light"
If you’ve lived here a few years, you might remember getting a "Colorado Cash Back" check for $750 or more. Those were the glory days of huge TABOR surpluses.
For 2026, those refunds are going to feel... well, tiny. Most people are looking at checks between $20 and $62 depending on their income level. Why? Because the state is using that "excess" money elsewhere first. They’re using it to fund property tax relief for seniors and veterans, and to pay for the new Family Affordability Tax Credit.
Basically, the state is still giving the money back, but instead of a flat check to everyone, they’re targeting it toward specific groups or using it to keep your property taxes from exploding.
Actionable Steps for Your 2026 Taxes
Don't just wing it. If you want to keep as much of your paycheck as possible, here is what you need to do right now:
- Check your withholding: Since the income tax rate is back at 4.4% (up from that temporary 4.25%), make sure your employer is taking out enough. You don't want a surprise bill in April.
- Look for the Child Tax Credit: If you have a kid under age 6, Colorado has a beefed-up credit that could be worth up to $1,200 per child. It's refundable, meaning if you owe zero in taxes, they just send you the cash.
- Verify your "Add-Backs": If your federal taxable income is high, check the DR 0104 schedule. Colorado requires you to add back some of those federal itemized deductions if you're above certain thresholds.
- Sales Tax for Business Owners: If you run a shop, stop keeping that 3.3% service fee on state sales tax. As of January 1, 2026, that rule has vanished.
The tax landscape here is always moving. One year it’s a refund check, the next it’s a rate change. Keeping an eye on the Department of Revenue’s "DR 1002" form—which lists every local tax rate in the state—is the only way to stay truly sane.