COLORADO
Return to Retiree Tax Map
NICKNAME
The Centennial State
BOTTOM LINE: TAX-FRIENDLY
Colorado is a tax-friendly destination for retirees. It has a single low income tax rate of 4.63% of federal taxable income. Taxpayers 55 and older get a generous retirement-income exclusion from state taxes. The state sales-tax rate is 2.9%, but local taxes can boost the combined rate as high as 9.5%. Seniors may qualify for a homestead exemption of up to 50% of property value.
STATE SALES TAX
2.9% (food and prescription drugs are exempt). Many cities and counties have their own rates, which are added to the state rate. The total tax rate can be as high as 9.5%.
INCOME-TAX RANGE
Colorado has a single income-tax rate of 4.63% of federal taxable income. Taxpayers are also subject to a Colorado alternative minimum tax.
SOCIAL SECURITY
For beneficiaries younger than 65, up to $20,000 of Social Security benefits can be excluded, along with other retirement income. Those 65 and older can exclude benefits and other retirement income up to $24,000. Also, Social Security income not taxed by the federal government is not added back to adjusted gross income for state income tax purposes.
EXEMPTIONS FOR OTHER RETIREMENT INCOME
Under Colorado's pension/annuity subtraction, taxpayers 55 to 64 years old can exclude a total of up to $20,000 of Social Security, state and local pensions, federal civil-service pensions, military pensions and private pensions. Those 65 and older can exclude up to $24,000 from the same pension programs. All out-of-state government pensions qualify for the pension exemption. As with Social Security income, Railroad Retirement income not taxed by the federal government is not added back to adjusted gross income for state income tax purposes.
PROPERTY TAXES
The county assessor determines the value of property using a market, cost or income approach. For 2012, property taxes on real estate are assessed at 7.96% of the property's actual value. You can determine your property-tax bill by multiplying the assessed value by the local tax rate.
Tax breaks for seniors: A homestead exemption is available for qualifying seniors and the surviving spouse of a senior who previously qualified. Seniors must be at least age 65. It allows 50% (up to a maximum reduction of $200,000) in actual value of a primary residence to be exempt. The state pays the tax on the exempted value. The person must have owned and lived in the home for at least ten years. This exemption is also available to qualifying disabled veterans.
Full-year Colorado residents age 65 or older or disabled, or a surviving spouse age 58 or older, may qualify for the Property Tax/Rent/Heat Rebate and/or the Property Tax Deferral. Qualified applicants can receive a rebate of up to $600 of the property tax and $192 of their heating expenses paid during the year, either directly or as part of their rent payments.
INHERITANCE AND ESTATE TAXES
There is no inheritance tax and no estate tax.
Visit RetirementLiving.com for a complete rundown of taxes in Colorado.
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