Taxes in Colorado: State Tax Guide 2026
Data Notice: Figures, rates, and statistics cited in this article are based on the most recent available data at time of writing and may reflect projections or prior-year figures. Always verify current numbers with official sources before making financial, medical, or educational decisions.
Taxes in Colorado: State Tax Guide 2026
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
Colorado’s flat income tax rate of 4.40% puts it in the middle of the pack nationally, but the TABOR (Taxpayer’s Bill of Rights) amendment makes it unique among all 50 states. TABOR limits how much revenue the government can collect, and when collections exceed the cap, taxpayers receive refunds. Colorado’s booming Front Range economy, outdoor lifestyle, and moderate overall tax burden make understanding the tax landscape critical for residents and transplants.
Colorado Income Tax Rates (2026)
Colorado uses a flat income tax:
| Tax Rate | Taxable Income Range |
|---|---|
| 4.40% | All taxable income |
Colorado reduced its rate from 4.55% to 4.40% effective 2024. The state has historically used a flat rate tied to federal taxable income.
Colorado’s taxable income starts with federal taxable income and then applies state-specific additions and subtractions. There is no separate state standard deduction — the federal standard deduction is already embedded in federal taxable income.
Sales Tax
| Component | Rate |
|---|---|
| State base rate | 2.90% |
| Average combined (state + local) | ~7.77% |
| Highest combined rate | ~11.20% (in some jurisdictions) |
Colorado has one of the lowest state base sales tax rates, but local add-ons are aggressive. Denver’s combined rate is ~8.81%. Some mountain resort towns push the rate above 10%.
Home rule cities: Many Colorado cities are “home rule” jurisdictions that administer their own sales tax independently of the state. Businesses may need to register and file separately in multiple cities. This is one of the most complex sales tax environments in the country.
Exempt from sales tax: Most groceries (exempt from state tax; local taxes may still apply), prescription medications, and certain medical equipment.
Property Tax
| Metric | Amount |
|---|---|
| Average effective rate | ~0.49% |
| National average | 0.99% |
Colorado has some of the lowest property taxes in the nation. The state uses an assessment rate applied to actual value: ~6.70% for residential property and ~29% for most commercial property. This low residential assessment ratio is the main reason effective rates are so low.
Gallagher Amendment (repealed 2020): Previously required that residential property as a class make up no more than ~45% of total assessed value statewide, which kept residential rates low. After repeal, the legislature sets the residential assessment rate directly.
Senior homestead exemption: Qualifying homeowners aged 65+ who have lived in their home for 10+ years can exempt 50% of the first ~$200,000 of actual value from property tax.
Other Taxes
- Estate and inheritance tax: Colorado does not impose a state estate tax or inheritance tax.
- Capital gains: Taxed as ordinary income at the flat 4.40% rate. No state-level preferential rate for long-term gains.
- TABOR refunds: When state revenue exceeds TABOR limits, taxpayers receive refunds. Recent refunds have exceeded ~$800 per taxpayer in some years. The mechanism varies — sometimes as direct checks, sometimes as credits.
- Fuel tax: ~$0.22 per gallon, though a phased increase under SB21-260 is pushing this higher for road funding.
- Cigarette tax: ~$1.94 per pack (increased by voter-approved Proposition EE).
- Marijuana tax: 15% excise tax on wholesale and ~15% special sales tax on retail, in addition to standard sales tax. Combined effective rate on recreational cannabis is approximately 25%+.
- No local income taxes apart from certain occupational privilege taxes (flat monthly fees charged by some cities, typically ~$2–$6/month for employees).
Tax Breaks and Credits
- TABOR refunds: Automatic refunds when revenue exceeds constitutional limits — a unique feature found only in Colorado.
- Child tax credit: Colorado enacted a state-level child tax credit starting in 2023, providing up to ~$1,200 per child for qualifying low-income families.
- Earned income tax credit: ~25% of the federal EITC for qualifying filers.
- Retirement income exclusion: Taxpayers aged 55–64 can exclude up to ~$20,000 of pension/annuity income. Those 65+ can exclude up to ~$24,000. Social Security benefits that are included in federal taxable income can be subtracted on the Colorado return.
- 529 plan deduction: Full deduction for contributions to Colorado’s CollegeInvest plan, with no dollar cap.
- Wildfire mitigation credit: Up to 50% of costs for wildfire mitigation on residential property, capped at ~$2,500.
- EV tax credit: Colorado offers one of the most generous state-level EV tax credits, up to ~$5,000 for qualifying new electric vehicles.
Key Takeaways
- Colorado’s flat 4.40% income tax rate is moderate, and TABOR refunds can effectively lower the burden further
- Sales tax is deceptively complex: a low 2.90% state rate balloons to 8%–11% after local add-ons, with home-rule city complications
- Property taxes are among the lowest nationally at ~0.49%, thanks to the low residential assessment ratio
- Generous retirement income exclusions and no Social Security tax make Colorado competitive for retirees
- The state’s EV credit and 529 deduction are among the most generous in the nation
Next Steps
- Compare Colorado to other states at State Income Tax Comparison: All 50 States Ranked
- Understand your federal obligation with the Federal Income Tax Guide 2026
- Make sure you claim everything you can — Tax Deductions You’re Probably Missing
- Ready to file? See How to File Your Taxes Step by Step
Tax information is for educational purposes only. Consult a licensed tax professional.