State & Local Taxes
Colorado State Income Tax: 2026 Flat Rate and TABOR Refunds
Colorado state income tax is a flat 4.40% applied to federal taxable income, with no brackets and no separate state standard deduction. The rate can drop temporarily in years when the state collects a large enough surplus under the Taxpayer’s Bill of Rights (TABOR). For tax year 2024 the rate fell to 4.25%. For tax year 2025 (returns filed in early 2026) the rate is 4.40%, because the surplus came in just under the trigger. This guide covers the rate, the starting point, TABOR refunds, and residency rules.
What is the Colorado state income tax rate in 2026?
Colorado applies a single flat rate of 4.40% to taxable income for the 2025 tax year, the return most people file in 2026. Everyone pays the same percentage regardless of income level. The rate can be reduced temporarily when TABOR surplus exceeds a statutory threshold, so the effective rate in any given year may be lower than 4.40%.
The 4.40% figure is the permanent statutory rate. Colorado voters lowered it in two steps: Proposition 116 (2020) cut the rate from 4.63% to 4.55%, and Proposition 121 (2022) cut it further to 4.40%, retroactive to the 2022 tax year. Colorado has used a flat rate since 1987.
| Tax year | Filed in | Rate applied | Why |
|---|---|---|---|
| 2020–2021 | 2021–2022 | 4.55% | Proposition 116 |
| 2022 | 2023 | 4.40% | Proposition 121 |
| 2023 | 2024 | 4.40% (with 4.40%→4.25% TABOR-year variation depending on surplus) | Statutory rate / TABOR |
| 2024 | 2025 | 4.25% | TABOR surplus reduction |
| 2025 | 2026 | 4.40% | Surplus below $300M trigger |
Because the reduction resets each year, treat any rate below 4.40% as temporary and confirm the current year’s figure with the Colorado Department of Revenue before filing.
How Colorado calculates taxable income
Colorado starts from your federal taxable income, the figure on your federal Form 1040, then applies state-specific additions and subtractions to reach Colorado taxable income. Because the starting point already reflects your federal standard or itemized deduction, Colorado does not publish its own standard deduction. Individuals report on Form DR 0104.
The federal-taxable-income starting point means anything that lowers your federal taxable income, such as the federal standard deduction ($15,000 for single filers, $30,000 for married filing jointly in 2025), also lowers your Colorado base before the flat rate is applied.
Common Colorado subtractions can include a portion of pension and annuity income, certain retirement income for taxpayers 55 and older, and contributions to CollegeInvest 529 plans, depending on eligibility. Common additions can include interest from other states’ municipal bonds. The net effect varies by return, so two people with the same federal income can owe different Colorado tax.
TABOR refunds and the temporary rate reduction
TABOR is a 1992 Colorado constitutional amendment that caps how much revenue the state may keep and requires the excess to be returned to taxpayers. When the state collects more than the cap allows, it refunds the surplus through several mechanisms, one of which can temporarily lower the income tax rate. Whether a reduction applies in a given year depends entirely on the size of that year’s surplus.
Senate Bill 24-228, signed May 14, 2024, set the current mechanism for fiscal years 2024-25 through 2034-35. After the state funds homestead and senior property-tax reimbursements, the remaining surplus is distributed in tiers:
- $300 million or less: only the sales tax refund mechanism is triggered; the income tax rate is not reduced.
- Above $300 million up to $1.5 billion: a temporary income tax rate reduction applies first, then the sales tax refund.
- Above $1.5 billion: the income tax reduction, a temporary sales and use tax reduction, and the sales tax refund all apply.
When the surplus lands in the income-tax band, the size of the cut scales with the surplus, as shown below. These reductions are one-year events that expire automatically.
| Surplus above the $300M threshold | Rate reduction | Resulting rate |
|---|---|---|
| $300M–$500M | 0.04% | 4.36% |
| $500M–$600M | 0.07% | 4.33% |
| $600M–$700M | 0.09% | 4.31% |
| $700M–$800M | 0.11% | 4.29% |
| $800M–$1B | 0.12% | 4.28% |
| $1B–$1.5B | 0.13% | 4.27% |
| Above $1.5B | 0.15% | 4.25% |
For the 2025 tax year, the surplus available after reimbursements was about $293.3 million, just under the $300 million trigger, so no income tax reduction applied and the rate held at 4.40%. Any remaining surplus in that situation is generally returned through the six-tier sales tax refund, claimed on the state income tax return and scaled by income.
Who owes Colorado income tax: residency rules
Colorado taxes residents on all income from all sources and taxes nonresidents only on income sourced to Colorado. Your filing category depends on where you are domiciled and how many days you spend in the state. Part-year residents fall between the two, owing tax on all income earned while a resident plus Colorado-sourced income earned while a nonresident.
You are generally a full-year Colorado resident if you are domiciled in Colorado or maintain a permanent home there and spend more than 182 days in the state during the tax year. Full-year residents file Form DR 0104 and report worldwide income.
Part-year residents and nonresidents complete Form DR 0104PN to apportion income to Colorado. A nonresident who earns wages, rental income, or business income tied to Colorado may owe tax on that Colorado-sourced portion even without living in the state. Rules can turn on specific facts, so confirm your status when you move mid-year or work across state lines.
Colorado compared to nearby and no-tax states
Colorado’s flat 4.40% sits below the top rates of most progressive-rate states but above states that levy no income tax at all. A flat rate means high earners and low earners face the same marginal percentage, unlike the tiered systems in California or New York.
Colorado also layers state and local sales taxes on top of income tax, and the combined burden differs from states like Texas or Florida that rely on sales and property taxes instead of an income tax. For a fuller picture, weigh income tax against sales and property taxes rather than the headline rate alone.
Frequently asked questions
Does Colorado have income tax brackets?
No. Colorado uses a single flat rate, 4.40% for the 2025 tax year, applied to all taxable income regardless of amount. There are no brackets and no marginal steps. A temporary TABOR reduction can lower that flat rate for a single year, but the structure stays flat. This differs from progressive systems where higher income is taxed at higher marginal rates.
Why was Colorado’s income tax rate 4.25% one year and 4.40% the next?
The 4.25% rate for tax year 2024 was a temporary TABOR surplus reduction, not a permanent change. TABOR requires excess state revenue to be refunded, and one mechanism cuts the income tax rate when the surplus is large enough. For tax year 2025 the surplus fell below the $300 million trigger, so the rate returned to the statutory 4.40%.
What is the starting point for Colorado income tax?
Colorado begins with your federal taxable income, the figure from your federal Form 1040, then applies Colorado additions and subtractions to reach Colorado taxable income. Because federal taxable income already reflects the federal standard or itemized deduction, Colorado does not offer a separate standard deduction. The flat rate is applied to the adjusted state figure.
How do I claim a Colorado TABOR refund?
TABOR refunds reach taxpayers through more than one channel. A temporary income tax rate reduction, when triggered, is applied automatically when you file. The sales tax refund portion is claimed on your Colorado income tax return (Form DR 0104), with the amount often scaled by income tier. Filing a return is generally required to receive the refund.
Do I owe Colorado income tax if I do not live there?
You may. Nonresidents owe Colorado tax on income sourced to Colorado, such as wages for work performed in the state, Colorado rental income, or income from a Colorado business. Nonresidents and part-year residents use Form DR 0104PN to apportion income. Whether specific income is Colorado-sourced can depend on the facts, so confirm your situation.
Is Social Security taxed in Colorado?
Colorado allows a subtraction for certain retirement income, and taxpayers 65 and older can generally subtract all federally taxable Social Security benefits, while those aged 55 to 64 may subtract a limited amount, subject to eligibility rules. Because these subtractions change with age and income, verify the current-year limits with the Colorado Department of Revenue before filing.
Colorado’s flat structure keeps the arithmetic simple, but the TABOR overlay means the effective rate can shift year to year. Compare Colorado against the rate and bracket rules in other states and confirm the current-year figure before you file. For related reading, see our guides to California’s rates and brackets, New York’s 2026 brackets, Ohio’s rates, and the states that levy no income tax at all.
Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.