Colorado State Tax Guide

Bottom Line

Middle-Class Families: Tax-Friendly (Go to the Kiplinger Tax Map for Middle-Class Families)

Retirees: Most Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)

If you'd like to live in the mountains (or at their feet) the Centennial State is a generally a tax-friendly place to do it. Colorado has a reasonable rate income tax: If you have federal taxable income, the rate is a flat 4.4% for 2022. When it comes to property taxes, Colorado has one of the lowest median tax rates in the country. Gas taxes are on the low end, too.

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One downside is that Colorado's sales tax (which has a local component) is on the high side and can exceed 11% in some parts of the state. But, if you don't plan on shopping too much, then you shouldn't be hit too hard with the tax.

Colorado Income Taxes

Colorado Income Tax Range

For the 2022 tax year, Colorado has a flat income tax rate of 4.4%. (It was lowered from 4.55% to 4.4% by Proposition 121, which was approved by voters on November 8, 2022.)

Denver and a few other cities in Colorado also impose a monthly payroll tax.

Colorado Taxation of Social Security Benefits

Up to $24,000 of Social Security benefits taxed by the federal government, along with other retirement income, can be excluded for Colorado income tax purposes ($20,000 for taxpayers 55 to 64 years old).

Beginning in 2022, the $24,000 cap is removed for federally taxable Social Security benefits, which effectively makes all federally taxed Social Security income deductible for taxpayers 65 and over.

Colorado Tax Breaks for Other Retirement Income

Taxpayers age 65 and older can exclude up to $24,000 of income from private, government and military retirement plans (including from IRAs), along with Social Security benefits taxed at the federal level ($20,000 for taxpayers 55 to 64 years old). Beginning in 2022, if the total Social Security benefits that were included in federal taxable income exceed the $24,000 cap, then the cap is increased to equal the Social Security benefits taxed at the federal level.

For the 2022 and 2023 tax year, taxpayers under age 55 can exclude up to $15,000 of income from a military retirement plan.

Railroad Retirement benefits are also exempt.

Colorado Sales Tax

2.9% state levy. Localities can add as much as 8.3%, and the average combined rate is 7.77%, according to the Tax Foundation.

• Groceries: Exempt
• Clothing: Taxable
• Motor Vehicles: Taxable
• Prescription Drugs: Exempt

Colorado Real Property Taxes

In Colorado, the median property tax rate is $485 per $100,000 of assessed home value.

Colorado Property Tax Breaks for Retirees

Residents 65 and over may be eligible to exempt 50% of the first $200,000 of actual value of a primary residence from property taxes. Applicants must have owned and lived in the home for at least 10 years.

For the 2022 tax year, an income tax credit of up to $1,000 is available for residents age 65 or older with a federal adjusted gross income of $75,000 or less who don't claim the property tax exemption for 2022.

Senior citizens age 65 and older may also qualify for a deferral of their property tax payments. The deferred taxes must be paid when the property is sold or otherwise transferred, but they can also be paid earlier without affecting eligibility for a future deferral.

Full-year Colorado residents age 65 or older may qualify for the Property Tax/Rent/Heat Rebate if they are single with an income less than $15,831 or married with a combined income less than $21,381 for 2021 (income limits are updated every year).

In addition, seniors age 60 and older may apply for the property tax work-off program if there is such a program where they live. Under these programs, eligible residents can work for the city or county government, which will then pay off a portion of their property taxes.

Colorado Motor Fuel Taxes

Gasoline: 22¢ per gallon.

Diesel: 20.5¢ per gallon.

Colorado Sin Taxes

Cigarettes: $1.94 per pack; additional local taxes may also apply

All other tobacco products: 50% of manufacturer's list price

Vapor products: 35% of manufacturer's list price (50% effective January 1, 2023)

Beer: $0.08 per gallon

Wine: $0.32 per gallon

Liquor: $2.28 per gallon

Marijuana: For retail purchases, 15% state retail marijuana sales tax and 15% excise tax, plus state and local sales taxes

Colorado Estate and Inheritance Taxes

No estate or inheritance tax.