By Shane Cummings, CFP®, AIF®, Wealth Advisor & Director of Technology/Cybersecurity
Colorado’s tax landscape is changing in 2025, and whether you’re a resident, a nonresident earning income in Colorado, or a business owner, understanding these updates is key to planning your finances. Here’s a guide to Colorado’s current state income tax rates and deductions—and what sets the Centennial State apart.
Colorado’s Flat Income Tax Rate for 2025
There are no tax brackets in Colorado. For the tax year starting January 1, 2025, Colorado continued with its flat income tax system. The rate for 2025 is 4.40% for all taxable income, up slightly from last year’s 4.25%. This means every taxpayer—regardless of income level—pays the same percentage on their Colorado taxable income.
Both residents and nonresidents earning income in Colorado are subject to this rate. Colorado’s tax rate stood at 4.40% in 2023, and 2024 saw that rate temporarily reduced as a way for the state to refund excess revenues under the Colorado Taxpayer Bill of Rights.
Standard Deductions and Filing Status
Colorado generally follows federal deduction rules. For 2024, the standard deductions were:
- Single: $14,600
- Married Filing Jointly: $29,200
These deductions help reduce your taxable income, making it important to choose the correct filing status.
Additionally, the state offers a generous tax deduction for 529 college savings plan contributions made to a Colorado 529 plan. State taxpayers can deduct up to $25,400 for single filers to these 529 plans—or $38,100 per tax filing for joint filers.
Special Considerations
- Retirees: Colorado offers generous deductions for retirement income—up to $24,000 for those aged 65 and older, and $20,000 for retirees aged 55–64.
- Local Taxes: Some cities like Denver levy additional occupational privilege taxes, so check your local requirements.
- Capital Gains: These are taxed at the same rate as ordinary income.
How Colorado’s Tax Brackets Compare to Other States
Unlike states with progressive tax brackets, Colorado’s flat tax is simple and predictable. The state also boasts relatively low property and sales taxes, making it attractive for many taxpayers. Some counties and cities in Colorado may levy their own sales taxes, making the total average sales tax rate higher.
Be Sure to Consult with a Tax Professional for Your Unique Concerns
Colorado’s tax system remains straightforward, but 2025 brings a few changes worth noting. For the most accurate information, the Colorado Department of Revenue is a useful resource. A trusted tax professional can offer personalized advice.
If you are looking for help understanding how to integrate your investing and tax strategies, Halbert Hargrove has offices in Denver and Boulder to serve our clients. Our wealth advisory services are geared toward integrating our investing strategies with each individual or family’s unique tax situation.
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