State-by-State Guide to Taxes on Retirees - Colorado
Tool | November 2019

State-by-State Guide to Taxes on Retirees

Colorado

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The Bottom Line
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Tax-Friendly

If you’d like to retire early in the mountains (or at their feet) the Centennial State is a promising place to do it. In Colorado, taxpayers 55 and older get a generous retirement-income exclusion from state taxes, and it gets better when they reach 65. And when it comes to property taxes, seniors may qualify for an exemption of up to 50% of the first $200,000 of property value. But the Centennial state’s sales taxes (which have a local component) are on the high side, and can reach 11% in some places.

State Sales Tax

2.9% state levy. Localities can add as much as 8.30%, and the average combined rate is 7.63%, 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.

Effective tax rate: 4.62% for single filers, 4.74% for joint filers.

Social Security

Up to $24,000 of Social Security benefits taxed by the federal government, along with other retirement income, can be excluded for Colorado income tax purposes ($20,000 for taxpayers 55 to 64 years old).

Exemptions for Other Retirement Income

Taxpayers age 65 and older can exclude up to $24,000 of income from private, government and military retirement plans (including from IRAs), along with Social Security benefits taxed at the federal level ($20,000 for taxpayers 55 to 64 years old).

Starting in 2019, taxpayers under age 55 can exclude up to $4,500 of income from a military retirement plan. This exemption increases to $7,500 for 2020; $10,000 for 2021; and $15,000 for 2022 and 2023.

Railroad Retirement benefits are also exempt.

Property Taxes

In Colorado, residents pay an average of $607 in taxes per $100,000 of assessed home value.

Tax breaks for seniors: Residents 65 and over (or the surviving spouse of a senior who previously qualified) are eligible to exempt 50% of the first $200,000 of actual value of a primary residence from property taxes. Applicants must have owned and lived in the home for at least 10 years. Senior citizens and veterans may also qualify to defer payment of 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 $14,074 or married combined income is less than $18,972 (for 2018-19; values are updated every year). Qualified applicants can receive a rebate of up to $600 of their 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.

Vehicle Taxes

An “ownership tax” is assessed on the original taxable value and year of service. Original taxable value is 85% of the sticker price. Rates are set at the county level.

Inheritance and Estate Taxes

None.

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