What Is the State Income Tax for Colorado
Taxes in Colorado
Colorado State Tax Quick Facts
- Income tax: 4.63% flat rate
- Sales tax: 2.90% - 11.20%
- Property tax: 0.49% average effective rate
- Gas tax: 22.0 cents per gallon of regular gasoline, 20.5 cents per gallon of diesel
The Centennial State has a flat income tax rate of 4.63%, and one of the lowest statewide sales taxes in the country, at just 2.90%. However, because of numerous additional county and city sales taxes, actual combined rates can be as high as 11.20%. When considering these local taxes, the average Colorado sales tax rate is 7.65%.
On the other hand, homeowners in Colorado get a break on real estate taxes. The state's property tax rates are among the nation's lowest, with an average effective rate of just 0.49%.
A financial advisor in Colorado can help you understand how taxes fit into your overall financial goals. Financial advisors can also help with investing and financial plans, including retirement, homeownership, insurance and more, to make sure you are preparing for the future.
Colorado Income Taxes
The state income tax in Colorado is assessed at a flat rate of 4.63%, which means that everyone in Colorado pays that same rate, regardless of their income level. There are eight other states with a flat income tax. Among these states, Colorado's rate ranks in about the middle of the pack. Colorado's income tax is also fairly average when compared to the top rate of those states with a progressive income tax.
That 4.63% applies to Colorado taxable income, which is equal to federal taxable income. This means that taxpayers who do not itemize deductions on their federal income tax return do not have the option to do so on their state return; conversely, taxpayers who do itemize deductions federally must claim the same deductions on their state return.
There are a couple of exceptions to this. One is that taxpayers who make donations to charity, but do not itemize deductions on their federal return, may be able to deduct those donations on their Colorado state income taxes. Another is the deduction for state income taxes (also known as the SALT deduction). Taxpayers who itemize deductions federally, and claim this deduction, must add it back to their Colorado taxable federal income tax return.
Colorado Tax Credits
After calculating their initial tax bill, there are some additional tax credits Coloradoans can claim. The most significant of these are the Child Care Contribution Credit (which is equal to a percentage of the similar federal credit), the Earned Income Credit (equal to 10% of the federal credit) and the Alternative Fuel Credit, which is available to taxpayers who purchase an alternative fuel vehicle such as a battery-powered electric car.
Colorado Sales Tax
The statewide sales tax in Colorado is just 2.9%, lowest among states with a sales tax. However, as anyone who has spent time in Denver, Boulder or Colorado Springs can tell you, actual sales tax rates are much higher in most cities. This is because many cities and counties have their own sales taxes in addition to the state sales tax. The table below shows sales tax rates for all counties and the largest cities in Colorado.
Property and tangible goods (including electronically delivered goods such as music downloads) are subject to sales tax in Colorado, but most services are not. While prepared food is taxable, most food that is purchased for consumption at home (i.e. groceries) is nontaxable. Prescription drugs are also tax-exempt in Colorado.
Colorado Property Tax
If you're thinking about finally investing in that Rocky Mountain ski lodge, there's some good news: Colorado has some of the lowest property taxes in the country. The state's average effective property tax rate (property taxes paid as a percentage of home value) of 0.49% is one of the lowest in the U.S. In some areas, effective property taxes are even lower. In Gilpin County, for example, where homeowners there pay about $791 annually in property taxes, the rate is just 0.23%.
Before purchasing your new chalet, you'll want to take a look at our Colorado mortgage guide to get a full understanding of the mortgage market in the Centennial State.
Colorado Marijuana Tax
As of 2014, marijuana is both legal and taxable in Colorado. The marijuana tax rate is a combined 30%, though consumers will only pay half of this. More specifically, marijuana retailers must pay a 15% excise tax when they buy from a cultivator, leaving consumers to pay the other 15% in the form of a sales tax at the time of purchase. The 2.9% state sales tax rate only applies to medical marijuana.
Colorado Estate Tax
There is no estate or inheritance tax in Colorado.
Colorado Capital Gains Tax
Most capital gains in Colorado are taxed at the standard income tax rate of 4.63%. However, certain long-term gains are exempt. Gains from property acquired after May 9, 1994, which was held for at least five years before being sold, may be exempt up to a limit of $100,000.
Colorado Gas Tax
The gas tax in Colorado is 22 cents per gallon of regular gas, one of the lowest rates in the U.S. Diesel fuel is taxed at a rate of 20.5 cents per gallon.
- The highest point in Colorado is the peak of Mount Elbert, at 14,433 feet. The lowest point is along the Arkansas River, at 3,350 feet.
- Colorado's nickname is the Centennial State because it achieved statehood less than a month after the centennial of the U.S. Declaration of Independence.
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Places with the Lowest Tax Burden
Are you curious how your tax burden stacks up against others in your state? SmartAsset's interactive map highlights the counties with the lowest tax burden. Scroll over any county in the state to learn about taxes in that specific area.
| Rank | County | Income Tax | Sales Tax | Property Tax | Fuel Tax |
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Methodology
To find the places with the lowest tax burdens, SmartAsset calculated the amount of money a specific person would pay in income, sales, property and fuel taxes in each county in the country.
To better compare income tax burdens across counties, we used the national median household income. We then applied relevant deductions and exemptions before calculating federal, state and local income taxes.
In order to determine sales tax burden, we estimated that 35% of take-home (after-tax) pay is spent on taxable goods. We multiplied the average sales tax rate for a county by the household income after taxes. This balance is then multiplied by 35% to estimate the sales tax paid.For property taxes, we compared the median property taxes paid in each county.
For fuel taxes, we first distributed statewide vehicle miles traveled to the county level using the number of vehicles in each county. We then calculated the total number of licensed drivers within each county. The countywide miles were then distributed amongst the licensed drivers in the county, which gave us the miles driven per licensed driver. Using the nationwide average fuel economy, we calculated the average gallons of gas used per driver in each county and multiplied that by the fuel tax.
We then added the dollar amount for income, sales, property and fuel taxes to calculate a total tax burden. Finally, each county was ranked and indexed, on a scale of 0 to100. The county with the lowest tax burden received a score of 100 and the remaining counties in the study were scored based on how closely their tax burden compares.
Sources: US Census Bureau 2018 American Community Survey, Government Sources, Avalara, American Petroleum Institute, GasBuddy, UMTRI, Federal Highway Administration, SmartAsset
What Is the State Income Tax for Colorado
Source: https://smartasset.com/taxes/colorado-tax-calculator#:~:text=The%20state%20income%20tax%20in,regardless%20of%20their%20income%20level.