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Official Tax Guide

Colorado Taxes 2025: Income, Sales, and Property Tax Guide

Complete guide to Colorado state taxes. Income tax (4.4% (Flat)), sales tax, and what you need to know before moving.

Updated January 15, 2026
5 min read

Colorado State Tax Guide 2025

Moving to Colorado offers stunning landscapes and a vibrant economy, but understanding the state's tax structure is essential for financial planning. This guide provides an overview of Colorado's tax landscape for 2025, focusing on key areas relevant to new residents.

1. Income Tax

Colorado's income tax system is straightforward, making it relatively easy to calculate your state tax liability.

  • Tax Rate: The state income tax rate is a flat 4.4%.
  • System Type: Colorado uses a flat tax system. This means all taxable income levels are subject to the same 4.4% rate, regardless of filing status or income bracket. This differs from a progressive system, where tax rates increase as income rises.
  • Filing: Residents file a Colorado state income tax return annually, which is due in April, coinciding with the federal tax filing deadline.

2. Sales Tax

When purchasing goods and some services in Colorado, you will encounter sales tax. It's important to note that the total sales tax rate varies depending on your location.

  • State Rate: The statewide base sales tax rate is 2.9%.
  • Local Taxes: In addition to the state rate, counties, cities, and special districts can impose additional sales taxes. This means the total sales tax rate you pay can be significantly higher than the state minimum, often ranging from 3% to over 11% in some areas. Always check the local rate for any specific address.

3. Property Tax

Property taxes in Colorado are primarily levied at the local level to fund schools, fire districts, and other municipal services.

  • Overview: Colorado is known for having relatively low property tax rates compared to the national average. The effective property tax rate (the total amount paid as a percentage of home value) is generally below 0.6%.
  • Assessment: Property taxes are calculated based on the assessed value of your property, which is a fraction of its actual market value. The specific assessment rate can vary by county but is generally low.
  • Context for New Residents: While specific rates vary by location, Colorado's property tax burden is considered low to moderate on a national scale. This can be a significant advantage for homeowners.

4. Other Taxes

Beyond income, sales, and property taxes, Colorado has several other taxes to consider.

  • Gas Tax: Colorado imposes a state tax on gasoline and diesel fuel. As of 2025, the state gas tax is approximately $0.22 per gallon (subject to change by the legislature). This is in addition to the federal gas tax.
  • "Sin" Taxes: Colorado levies special excise taxes on specific goods, including:
    • Marijuana: A 15% excise tax on retail marijuana sales, plus a 15% sales tax (though medical marijuana has a lower rate).
    • Alcohol: State excise taxes apply to beer, wine, and spirits.
    • Tobacco: A state tax is applied to cigarettes and other tobacco products.
  • Inheritance Tax: Colorado does not have a state-level inheritance or estate tax. This is a significant benefit for heirs, as assets passed to beneficiaries are not subject to state tax (though federal estate tax rules may still apply).

5. Retiree Taxes

Colorado is generally considered a retiree-friendly state regarding taxation.

  • Retirement Income: Social Security benefits are not taxed at the state level in Colorado.
  • Pensions and 401(k) Distributions: Income from pensions and withdrawals from retirement accounts like 401(k)s and IRAs are subject to the flat 4.4% state income tax. However, Colorado offers a generous deduction for retirement income for seniors.
  • Senior Exemption: Taxpayers aged 65 and older can deduct up to $24,000 of retirement income (including pensions, annuities, and Social Security) from their state taxable income. This deduction is phased out for higher-income earners but provides substantial tax relief for many retirees.

6. Comparison to Neighboring States

Here’s how Colorado’s tax structure compares to some of its neighbors (note: rates can change):

  • Wyoming: Wyoming has no state income tax and a higher sales tax rate (around 4%). It is often more tax-friendly for high-income earners due to the lack of income tax.
  • Utah: Utah has a flat income tax rate of 4.55%, slightly higher than Colorado's 4.4%. Its sales tax rate is also higher than Colorado's base rate.
  • Arizona: Arizona has a progressive income tax system with a top rate of 2.5% for 2025 (subject to change), which is lower than Colorado's flat rate. Its sales tax rates are also generally higher.
  • New Mexico: New Mexico has a progressive income tax system with a top rate of 5.9%. Its sales tax rates can be high, especially in Albuquerque and Santa Fe.

Summary: Colorado offers a competitive tax environment with a low flat income tax rate and relatively low property taxes. While its sales tax base is low, local additions can make it higher in certain areas. It strikes a balance between income and sales tax compared to its neighbors.

Disclaimer: Tax laws and rates are subject to frequent changes by state legislatures. The information provided in this guide is for general informational purposes only and is based on 2025 data. It is not a substitute for professional tax advice. Consult a qualified CPA or tax professional for guidance tailored to your specific financial situation before making any relocation or tax-related decisions.