Colorado has a reputation for having low taxes—and that’s true, to an extent. That might make it sound like paying taxes in Colorado should be easy, but filing your taxes isn’t usually cut and dry, no matter what state you call home.
There are many factors that can impact what you owe for your Colorado tax return including what county you live in, your filing status, and the deductions you qualify for.
Whether you understand every aspect of Colorado taxes or not, you are responsible for completing your taxes correctly. That’s why we provide tools and resources that make the process as simple as possible.
Don’t risk making a mistake that could cost you $1000’s in fines; use our Colorado tax calculator or take advantage of our tax filing services.
It may seem redundant to pay both federal and state taxes in Colorado but the funds from each are directed toward important initiatives and resources. A good portion of state tax in Colorado reinvests in state priorities like public health, education, the economy, environment, and renewable resources.
Based on the state’s general tax rates, Colorado tax rates are considered fairly low compared to the rest of the country. Residents, part-time residents, and non-residents must file income taxes in Colorado for wages earned within the state.
How Much Is Colorado State Tax?
Generally, there are three Colorado state tax rates that will apply to everyone:
Colorado State Taxes: Quick Facts
Income tax: 4.63%
Sales tax: 2.9%
Property tax: 0.51%
Annual 2019 Tax Burden ($75,000/yr income)
Total Estimated Tax Burden
Remaining Income = $68,969
Like Massachusetts, Colorado has a flat income tax rate but individual counties may also impose additional taxes on their residents. So, while Colorado has generally low tax rates, they can still add up depending on where you live within the state. With hundreds of jurisdictions throughout Colorado, there is a lot of room for confusion, making it difficult to know exactly how much tax you owe—especially if you move during the year.
That’s where we come in. Community Tax has helped many Coloradans simplify the tax process and maximize their returns.
Colorado State Tax Brackets
When filing your federal taxes, you’ll be required to pay the rate assigned to your tax bracket. However, instead of seven different income tax rates at the federal level ranging between 10% and 37%, there is only one in Colorado: 4.63%.
Colorado Personal Income Tax
Colorado income tax is charged at a flat rate of 4.63%. This applies to both single and joint filers across the entire income spectrum. In other words, there are no Colorado tax brackets.
This can be seen as a pro or con, depending on where you lie on the spectrum. But, this also means that as your income increases, the percentage of taxes you’re required to pay doesn’t, so that’s something to look forward to.
What If You’re Self-Employed?
If you’re self-employed and have made more than $400 this year, you’re also required to pay Colorado income taxes.
It doesn’t matter whether you’re self-employed part-time or full-time—any work you do outside of your salaried or hourly job is considered self-employment. If you refer to yourself as an independent contractor or freelancer, you’re self-employed.
You’ll only be taxed at the flat 4.63% Colorado income tax rate. Another good thing is that you’re only taxed on 92.35% of your annual income. It’s also understood that running your own business often requires a lot of personal financial investment so you are able to deduct certain expenses.
We highly recommend that you keep detailed, accurate records of all your business expenses and documentation so you can make the most of potential deductions when it comes time to file your tax return.
While it may seem unfair that everyone is required to pay the same percentage of their income, Coloradans who make more money are subject to the alternative minimum tax (AMT). If you’re considered high income, you might have to comply with this rule.
While corporations aren’t subject to the AMT, individuals, estates, and trusts are. This must be paid in addition to your regular income taxes. Currently, AMT is applied at a rate of 3.47%. You will be able to subtract our tax credits though.
If it’s determined that you owe AMT, you’ll need to complete some additional forms.
Putting off filing your taxes because you’re overwhelmed by the idea of mind-numbing number crunching? Community Tax has your back. Use our Colorado tax calculator or speak with a knowledgeable team member today to find out how much you owe in state and federal income taxes.
Our pros make filing income tax a breeze, Give us a call!
Capital gains are the profit that you make from selling an asset. You’re required to report any capital gains on both your federal and state income tax returns. Federally, and in many states, capital gains are taxed at different rates depending on how long you had them before you sold them, as well as the amount of your traditional earned income.
In Colorado, you must have owned the asset for five years prior to selling for it to qualify. Most capital gains in Colorado are taxed at the same rate as your income, 4.63%. But some long-term capital gains may be exempt.
For your Colorado tax return, you might also get to subtract some of the capital gains from your income.
But what’s the catch? The capital gains must have been earned from Colorado sources and you must be a qualifying taxpayer. Basically, that means that you’re not overdue on your state taxes and you haven’t defaulted on any of your contractual obligations.
You’ll need to fill out Colorado tax form DR 1316 Colorado Source Capital Gain Affidavit in addition to your income tax return. Need help determining if any of your assets are held to these rules? An expert at Community Tax can review your assets and ensure your form is completed correctly.
Colorado State Sales Tax
Sales tax in Colorado starts at 2.9% but each county or city can charge more if they want to, up to 8.3% additional tax. Based on current state tax rates, this means that you may be required to pay up to 11.2% in taxes on goods and services.
Most cities take advantage of this option so the average sales tax is actually about 6%. Currently, the county with the highest sales tax is Grand County, where the maximum sales tax is 11.2%. The county with the lowest sales tax is Kiowa County at 2.9%.
Sound like you can’t catch a break? There are a few exemptions for sales tax that you can take advantage of, including groceries and medications. There are benefits to high sales taxes, too! A lot of the money collected will be put back into the community to improve the standard of living.
This might include beautification projects, roadway improvements, environmental initiatives, or investment in education. You can take pride in the fact that you’re contributing to creating a better place to live and work for yourself and those you care about.
Colorado Excise Tax
Excise taxes are charged on certain goods in addition to sales tax. The most common items affected by the excise tax are alcohol, beer, and fuel. You might not have been aware that you are paying these taxes because they’re usually included in the price.
For example, since the vendor is responsible for excise taxes, your favorite local bar will usually price their drinks higher to adjust for their cost. In Colorado, most relevant excise taxes include:
Gas Excise Tax in Colorado
The excise tax on gasoline is currently $0.22 per gallon which is lower than most states like Utah and Nebraska.
The gasoline excise tax has been steady for the last several years and is not anticipated to increase in the near future. In the big picture of your budget, the expense is fairly small, but for some, filling up the tank can mean sacrificing that cup of morning coffee on the way to work.
Excise Tax(per gallon)
One good thing about the excise tax on fuel is that the Centennial State puts its money where its mouth is when it comes to their commitment to being green. Distributors are also required to pay an Environmental Response Surcharge which goes directly to contamination cleanup.
Alcohol Excise Tax in Colorado
If you like to enjoy a drink or two, you’ll be paying a small portion of the excise fee charged to the vendor which is about $0.07 or $0.08 per gallon for wine or beer respectively. Even if you go out for a night of heavy drinking, you’re not likely to pay the full $0.60 per liter excise tax that’s applied to spirits.
Cigarette Excise Tax in Colorado
On the other hand, smoking could be a costly habit that actually affects your budget with an excise tax of $0.84 per pack of 20 cigarettes.
If you smoke a pack a day, you’re likely to spend more than $200 a month in cigarettes. That’s over $2,000 per year so you can see how the excise tax (also called “sin tax”) can be somewhat effective in discouraging people from smoking.
Marijuana Excise Tax in Colorado
Planning to take advantage of the fact that recreational marijuana’s now legal in Colorado? It can be an expensive indulgence.
All retail marijuana and marijuana-infused products are subject to a 15% excise tax. So that means you’ll be paying a minimum of 17.9% tax on any retail marijuana you purchase. If you’re purchasing medical marijuana, the excise tax does not apply, only the sales tax.
Excise taxes can have a positive effect on the economy. Colorado has collected a billion-dollar revenue from state Marijuana taxes, licenses, and fees alone. In a lot of cases, this money is also being used for some impressive projects like:
Bullying prevention programs
Mental health services
The Aurora Day Center is helping to address homelessness in the community. Pueblo and Adams County have used a portion of this money to set up scholarship funding for students in need.
Instead of thinking of excise taxes as an inconvenience, think of them as a reinvestment in your community.
Colorado Insurance Tax
As of 2019, there’s no longer a penalty for not having health insurance when filing your taxes federally or in Colorado.
If you do have a health plan through Connect for Health Colorado, you might qualify for a tax credit. To apply for this tax credit, you’ll need to complete Form 1095-A. If you qualify, you will receive your tax credit in a lump sum when you file your taxes.
Colorado State Property Tax
If you’ve been thinking about buying property in Colorado, it might be discouraging to learn that home prices that are amongst the top 5 highest in the nation. But there’s a reason people from all over the U.S. are flocking to Colorful Colorado.
In addition to beautiful mountain tops, world-class skiing, and bountiful wildlife, living in the Centennial State has its perks for property owners, like being able to deduct mortgage interest and other homeownership costs.
Technically, the state has one of the lowest state property tax rates at just 0.51%. But again, counties have the option to have their own higher rates. Because of this, the average property tax rate in Colorado is about 0.6%.
Note: This applies to assessed value (not the market value) of the property which is good for homeowners because the assessed value is generally lower.
Areas like Boulder and Denver had the highest property tax bills with homeowners paying an average of $3,506 and $2,529 respectively but Colorado Springs’ average property taxes are just half of that at around $1,296.
Overall, Coloradans paid a little over $2,000 on average in property taxes for the 201 tax season.
Considering that the average property tax bill for homeowners across the U.S. is nearly $3,500, it’s actually relatively affordable. When you think about all the advantages you have as a homeowner in the Centennial State, it really doesn’t seem like such a great cost to pay.
Plus, a lot of areas within the state are predicted to see an increase in property values over the next few years which makes ownership a smart investment that could pay off in a big way.
For the better part of a century, Colorado taxed on assets inherited from a loved one. Fortunately, there’s no longer an estate tax in Colorado. You should be aware though that there’s still a federal estate tax that could apply to you.
Colorado State Tax Credits
Now for the fun part - you might be able to lower your tax bill or even get a refund instead of owing by taking advantage of Colorado’s tax credits. A tax credit is directly subtracted from the money you owe as an incentive for partaking in some kind of program or investment. But not all tax credits are equal.
In Colorado, there are a variety of credits that can be included in your tax return, including:
Colorado Works Program
Childcare contribution and expenses
Plastic recycling investment
Historic property preservation
Innovative motor vehicle
Rural Jump Start Zone
Taxes paid to another state
Not sure which credits apply to you? Our tax professionals can help you determine if you qualify for any so you can maximize how much you get back this year.
Colorado State Tax Exemptions and Deductions
A deduction reduces your taxable income so you’ll want to make sure to account for all the deductions you qualify for on your tax return. This may include:
Innovative motor vehicle credit (You bought or leased a hybrid or electric vehicle)
Childcare expenses or contributions
First-time homebuyer savings account interest (You must have a specifically designated account)
Qualified reservation income (Income made from reservation resources)
Railroad retirement benefits
Military family relief fund grants
Wildfire mitigation measures
If you’re a retiree, there’s good news. You might be able to deduct thousands from your state taxes, significantly reducing your income and how much you’re required to pay. If you’re over 65 years old, you’re able to subtract $24,000 and if you’re between 55 and 64 years old, you’re allowed to deduct $20,000.
Retirees can substract 1000's from their income:
Note: Don’t forget, your taxable income is determined by your federal tax return so you’ll want to file that one first. In most cases, in order to itemize deductions on your state tax return, you need to first do so on your federal tax return but some deductions may not apply to both.
Working with one of our tax professionals can help you find any deductions you may not have been aware of and, most importantly, prevent any mistakes.
Discover more deductions -- speak to a tax pro today!
Our Colorado tax calculator is a free and easy way to determine how much you owe. If you find out that you owe more than you can afford, you might be able to arrange a payment plan for both federal and state taxes.
The worst thing you can do is not file your state income taxes. Doing so could leave you in an even deeper financial hole.
But beware - if you send payments without first having your payment plan approved, you might be facing some serious consequences. They have the option to send you to collections or even put a lien against or seize your assets. In some cases, they could also pursue wage garnishment.
Fortunately, arranging a payment plan is simple through the online portal or by calling the department at 1-303-205-8291.
Calculate Your Estimated Payment Installments
To calculate your estimated payments, you should use the DR 0104EP. This will help you prepare financially and make sure you submit your payments on time. Preparation and organization are key to staying on good terms with the Colorado Department of Revenue and avoiding penalties.
1. Estimated 2019 Colorado taxable income
2. Estimated 2019 Colorado income taxt -- 4.63% of line 1
3. Estimated 2019 Colorado alternative minimum tax
4. Estimated 2019 recapture of prior year credits
5. Total of lines 2, 3 and 4
6. All credits other than withholding, estimated payments and the State Sales Tax Refund $
7. Subtract line 6 from line 5
8. Estimated 2019 Colorado wage or nonresident real estate withholding tax
9. Net estimated tax, subtract line 8 from line 7
Net Amount Due ($)
2019 Overpayment Applied ($)
Payment Due ($)
Hanuary 15, 2020
Note: To file your Colorado state income taxes, you must complete and submit Form-104 by April 15th. If the 15th falls on a weekend, the due date will be the next business day.
How to Pay Colorado Taxes
In most cases, it is highly recommended that you hire a professional to file your federal and Colorado taxes. Community Tax is a full-service tax company that can help with every aspect of the process. But if you want to do it yourself, there are some important steps you will need to follow:
Submit your Colorado tax return online or by mail
If you anticipate that you’ll owe more than $1,000 in Colorado state tax, you’ll need to make one or more estimated payments.
Make your payment online or by mail.
If you’re paying by mail, you’ll need to use a check or money order. Write your Social Security number, the tax year and the words 'Form 104' on the check.
You should also submit a voucher for the payment unless you submitted your taxes on paper.
The good news is that if you overpay your taxes in Colorado, you’ll get that money back in a refund. Think of it as a short-term savings account.
Fallen behind on state taxes? Get help with tax resolution today!
California Residents: Please see our California Consumer Privacy Act Notice for additional information on the way we collect, use, and share your personal information and how to exercise your rights under the CCPA.