Kate Schubel
Colorado state tax: Overview
Colorado's tax landscape is a mix of simplicity and complexity, with some unique features that set it apart.
For example, a flat income tax rate is at its core, which makes personal income taxation straightforward. However, this simplicity is balanced by the state's Taxpayer's Bill of Rights (TABOR) program, which can result in tax refunds when state revenues exceed certain thresholds.
The state's approach to sales tax adds another layer of complexity, with a low state rate but significant variability at the local level. (Sales tax rates can be as high as 11% or more in some areas.) That means that where you shop can significantly impact how much sales tax you pay.
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Colorado also has specific policies regarding Social Security taxes, property tax relief for older residents, and family-oriented tax initiatives.
- For instance, families may benefit from tax-exempt essentials like groceries and diapers, and a new Colorado tax credit is designed to help those with children under 17.
- Older Coloradans may qualify for a homestead property tax exemption. Colorado's Promise Tax Credit also offers students two years of free college.
Those and other elements contribute to a tax environment that balances fiscal needs with resident benefits.
Here's more to know about Colorado state taxes, whether you're a current or prospective resident.
[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, the Sales Tax Handbook, and the Tax Foundation. Property taxes are cited as a rate percentage rather than the assessed value.]
Colorado income tax rate
Colorado's income tax rate is 4.4%. However, as mentioned, the state also has a unique TABOR program.
TABOR, or the Taxpayer's Bill of Rights, is a 1992 Colorado constitutional amendment that limits government revenue growth to inflation plus population increases. It requires voter approval for tax hikes; any revenue collected above the limit must be refunded to taxpayers, so it often generates refunds.
Note: With TABOR, residents must actively opt-in to receive TABOR refunds by checking a box on their state tax return. The deadline for filing state taxes and claiming the refund is April 15, 2025, or October 15, 2025, if filing for an extension.
Related: Don't Miss Your Colorado TABOR Refund When Filing Taxes.
- Some cities and localities in Colorado impose a monthly payroll tax.
- Social Security Benefits: Social Security income is deductible for taxpayers aged 65 and over. (More on that below.)
- For the 2025 tax year, taxpayers under age 55 can exclude up to $15,000 of income from a military retirement plan.
- Railroad Retirement benefits are exempt from state tax in Colorado.
Colorado has also changed its Social Security tax policy. Colorado already allows those 65 and older to subtract their Social Security benefits from state taxable income if their adjusted gross income (AGI) is below certain thresholds.
However, as of 2025, the state is expanding this exemption to those aged 55-64 with similar AGI limits. (For individual filers, the AGI limit is $75,000, while couples filing jointly can earn up to $95,000 and still qualify for the full deduction.)
For more information, see Two States Reform Social Security Policy in 2025.
Colorado sales tax
Colorado's state sales tax is 2.9%. Localities can add as much as 8.3%, and the average combined Colorado sales tax rate is 7.86%, according to the Tax Foundation.
- Groceries: Exempt
- Clothing: Taxable
- Motor Vehicles: Taxable
- Prescription Drugs: Exempt
What is the property tax rate in Colorado?
In Colorado, the average property tax rate as a percentage of assessed home value is 0.45%, according to the Tax Foundation.
Colorado Property Tax Breaks for Retirees
Colorado Property Tax Exemption for Adults 65 and Older: Colorado offers a property tax exemption for older adults aged 65 or older. Specific requirements must be met, but if you qualify, 50% of the first $200,000 of the value of a primary residence is exempt from property tax.
An applicant or married couple can apply for the exemption on only one property, which must be their primary residence. Married couples and individuals who apply for the exemption on multiple properties cannot claim the property tax exemption.
The qualifying resident must also have owned and lived in the home for at least ten years.
Colorado gas tax
Gasoline: Gasoline is taxed in Colorado at 22 cents per gallon.
Diesel: 21 cents per gallon.
Source: The Sales Tax Handbook
Colorado taxes on alcohol and tobacco
Colorado tobacco taxes
Product | Tax Amount |
|---|---|
Cigarettes | $0.84 per pack of 20 cigarettes |
All other tobacco products | 40% of the manufacturer's selling price |
Source: The Sales Tax Handbook
Colorado alcohol taxes
Product | Tax Amount |
|---|---|
Beer | $0.08 per gallon |
Wine | $0.28 per gallon |
Liquor | $2.28 per gallon |
Source: The Sales Tax Handbook
Marijuana: For retail purchases of marijuana in Colorado, a 15% state marijuana sales tax applies, and a 15% excise tax, plus state and local sales taxes.
Colorado estate and inheritance tax
Colorado doesn't have an estate or inheritance tax.
More on Colorado Taxes
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