Tool | September 2016

State-by-State Guide to Taxes on Retirees

Our comprehensive guide to taxes on retirement income, property and purchases, as well as special tax breaks for seniors, in every state.

Colorado

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The Bottom Line
Map of Colorado

Tax-Friendly

The Centennial State is a tax-friendly destination for retirees. It has a single, low income tax rate of 4.63%. 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 10%. Seniors may qualify for a homestead exemption of up to 50% of the first $200,000 of property value.

State Sales Tax

2.9% (food for home consumption is exempt). Many cities and counties have their own taxes, which are added to the state rate. The total can be as high as 10%, but the average is 7.4%, according to the Tax Foundation.

Income Tax Range

All Colorado residents who have federal taxable income pay a flat rate of 4.63%. Taxpayers are also subject to a state 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.

IRAs

Qualifies for exemption of up to $20,000 or up to $24,000, depending on age.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Qualifies for exemption of up to $20,000 or up to $24,000, depending on age.

Private Pensions

Qualifies for exemption of up to $20,000 or up to $24,000, depending on age.

Public Pensions

Qualifies for exemption of up to $20,000 or up to $24,000, depending on age.

Property Taxes

Median property tax on Colorado's median home value of $240,500 is $1,479, according to the Tax Foundation.

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 exempts 50% of the first $200,000 of actual value of a primary residence. The state pays the tax on the exempted value. The person must have owned and lived in the home for at least 10 years. This exemption is also available to qualifying disabled veterans.

Senior citizens and veterans may qualify to defer their property taxes.

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 if their single income is less than $12,720 or married combined income is less than $17,146. 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.

Seniors age 60 and older or those with a disability may apply for the property tax work-off program, which lets them work for the city or county government to pay off a portion of their property taxes.

Inheritance and
Estate Taxes

There is no inheritance tax or estate tax.