Taxes in Colorado
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While Colorado only partially exempts retirement income from state tax, the Centennial State levies reasonable rates on income, property, and gas taxes. Below, we explain various Colorado state taxes affecting retirement income, such as sales tax, inheritance tax, and property taxes.
For information regarding taxes in other states, see Retirement Taxes by State.
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Colorado Tax Rates
|State Sales Tax||2.90%|
|Avg State/Local Sales Tax||7.77%|
|Gas Tax||$0.20 per gallon|
|Diesel Tax||$0.205 per gallon|
|Cigarette Tax||$1.94 per pack|
|Effective Tax Rate||4.4%|
|Social Security Tax||Partial|
|Federal Income Tax Deduction||None|
Colorado State Taxes Explained
Colorado Sales Tax
2.9%. Food and prescription drugs are exempt, but the local tax rate could be as high as 8.3%. Total Colorado sales tax ranges from 2.9% to 11.2%, and there is a vehicle tax.
Colorado Income Taxes
For the 2022 tax year, Colorado has a flat income tax rate of 4.4%, which was lowered in November of 2022. Denver and several other cities also impose a monthly payroll tax.
Colorado Property Taxes
Property taxes levied vary by county. The effective tax rate is 0.51%, or $1,756 on the $343,600 median home value.
Colorado Property Tax Exemption Program for Seniors and Disabled Veterans provides tax relief to taxpayers who are at least 65 years old. Veterans who are VA classified as 100% disabled may apply, too. The program exempts 50% of the first $200,000 of the actual value of a primary residence from property taxes. Homeowners must have owned and lived on the property for a minimum of 10 years.
The Colorado Property Tax/Rent Rebate (PTC) benefits Colorado residents who are at least 65 years old or disabled regardless of age. The state has income restrictions for single taxpayers ($15,831) and married couples ($21,381). Rebates max out at $976 for property tax, rent, and heat. See the Colorado PTC page for more information.
Colorado also offers tax relief programs in the form of a deferral or tax work-off program for seniors.
Colorado Retirement Taxes
Colorado allows taxpayers to subtract some of their Social Security income (as well as pension income) as long as they are age 55 or older, under the “pension and annuity subtraction.” Up to $24,000 of federally taxed Social Security benefits and other retirement income are excluded from state income tax for those over age 65. Taxpayers in the 55 to 64 age range get a $20,000 exclusion.
Medical deductions follow the federal amount with some limitations. Taxpayers must add back state income taxes deducted on the federal return, regardless of whether paid to Colorado or another state.
Retired military members under age 55 can exclude up to $7,500 of income from a military retirement plan. This exemption increases to $10,000 for 2021, then $15,000 for 2022 and 2023. Those over 55 can use Colorado’s retirement income exemption described above.
Colorado Estate and Inheritance Taxes
Colorado has no estate tax and no inheritance tax.
For general information on Colorado taxes, visit the Colorado Department of Revenue.