Key Points

• Colorado state income tax rates are determined based on income brackets, with higher earners paying a higher percentage of their income in taxes.
• In 2023, the Colorado state income tax rates will remain the same as in 2022, with the following brackets and rates:
  • 4.55% on the first $15,800 of taxable income
  • 4.95% on taxable income between $15,801 and $53,000
  • 5.5% on taxable income between $53,001 and $150,000
  • 5.9% on taxable income over $150,000
• Colorado residents are also subject to federal income taxes, which are determined by a separate set of brackets and rates.
• Taxpayers can reduce their taxable income through various deductions and credits, such as charitable donations or contributions to a retirement account.

Introduction

Income tax rates for Colorado in 2023 are out and they’re lower than last year’s! For the tax year 2023, the personal income tax rates will be a flat tax rate of 4.55%. There are many other types of taxes in Colorado and they all get pretty complicated. In this article, you’ll learn a bit more about the income tax rate for Colorado and how to calculate it, property taxes, sales taxes, and more.

Colorado State Tax Quick Facts

Income tax for Colorado: 4.55% flat rate – There are cities that levy their own city income tax as well, including Denver.

• Sales tax: 2.90% – 11.20%
• Property taxes: 0.49% average effective rate but this differs by county
• Gas tax: 22.0 cents per gallon of regular gasoline, 20.5 cents per gallon of diesel

The state of Colorado has a flat income tax rate of 4.55%, and one of the lowest statewide sales taxes in the United States at just 2.90% which is next to nothing. Keep in mind, Colorado permits cities and counties to charge their own sales tax on top of Colorado’s state sales tax which can make it expensive in some areas. This can get as high as 11.2%, all considered.

The centennial states’ property taxes are absolutely among the nation’s lowest at an average rate of .49% of tax assessed value.

If you’re concerned with taxes, Progress Wealth Management is well known to be a leader in providing tax services to its clients. We can also help you invest, better protect yourself from liability, improve your ability to budget and plan for the future and reach your financial goals. Schedule an appointment by visiting our website and clicking “talk to an advisor”. 

Colorado Income Taxes

In Colorado, the state tax rate is a flat 4.55%. A flat tax is a tax rate that doesn’t change based on your income level so, whether you have a gross income of a million dollars per year of $50,000, you’ll pay the same tax rate in the calendar year. This applies to both single and married filers, as well as heads of household. There are no additional taxes or surcharges on income in Colorado. However, there is a 1.27% excise tax on the first $13,200 of taxable income for all filers. This excise tax is used to fund public schools in Colorado.

For Colorado residents, the state income tax is based on their federal taxable income. This means that any adjustments made on your federal return (such as itemized tax deductions) will also be applied to your state return. If you owe taxes to another state, you may also be required to pay taxes to Colorado on that income. Included below is an image that can help you understand how to calculate your state income tax bill. 

Colorado has a reciprocal agreement with several other states which allows residents to avoid paying taxes twice on the same income. If you live in one of these states and work in Colorado, you can claim a credit on your Colorado return for taxes paid to your home state. 

The states with which Colorado has reciprocal agreements are:

• Iowa
• Kentucky
• Michigan
• Missouri
• Montana
• Nebraska
• North Dakota
• Utah

Colorado Tax Credits

Colorado offers a number of tax credits to Colorado taxpayers. These credits can help offset the cost of taxes owed, or even provide a refund.

Some of the most popular tax credits in Colorado include the following:

Child and Dependent Care Credit

This credit is available to those who pay for child or dependent care so that they can work or look for work. The credit is worth up to 35% of eligible expenses, up to a maximum of $3,000 for one child or $6,000 for two or more children.

Elderly and Disabled Care Credit:

This credit is available to taxpayers who provide care for an elderly or disabled individual. The credit is worth up to 50% of eligible expenses, up to a maximum of $5,000 per year.

College Tuition Credit

This credit helps offset the cost of tuition and other related expenses at eligible colleges and universities. The credit is worth up to $1,500 per year.

Energy Conservation Credit

This credit is available to those who make energy-efficient improvements to their homes. The credit is worth up to 30% of the costs of eligible improvements, up to a maximum of $1,500.

Colorado State Sales Tax Rate

The Colorado sales tax rate is 2.9%, and the state allows localities to charge an additional 7% local tax for a combined total of up to 11%. The Colorado State Legislature has set a statewide sales tax holiday for the first Friday, Saturday, and Sunday in August, during which certain items are exempt from sales and use taxes. For example, in Jefferson County, the combined (City and state) sales tax rate is 4.5%.

Colorado Property Tax

Colorado’s income tax rates are some of the lowest in the country, and that includes our property tax rates. The average tax rate on property in Colorado is just 0.49%, which is far below the national average of 1.08%.

There are a few things that go into determining your property taxes in Colorado. The first is your home’s assessed value. This is usually lower than the actual market value of your home, and it’s what your taxes are based on. The second factor is your county’s mill levy, which is a set rate that all property owners in the county pay.

Depending on where you live in Colorado, your mill levy could be as low as 5 mills (0.5%) or as high as 35 mills (3.5%). So, if you have a home with an assessed value of $100,000, your property taxes could range from $500 to $3,500 per year.

Of course, there are other factors that can affect your property taxes, such as whether you qualify for any exemptions or discounts. But overall, Colorado has relatively low property taxes compared to other states.

Colorado Marijuana Tax

Since Colorado legalized marijuana in 2014, the state has collected over $1 billion in tax revenue from cannabis sales. The majority of this revenue comes from the state’s 2.9% sales tax on all marijuana purchases, which generated $505 million in 2018 alone. In addition to this sales tax, Colorado also imposes a special 10% excise tax on all retail cannabis sales, which raised an additional $58 million last year.

Colorado Estate Tax

There is no estate tax in the centennial state. If you pass away with any amount over the lifetime exemption, your estate will owe estate taxes to the federal government but none to the state of Colorado.

Colorado Capital Gains Tax

You have to recognize a capital gain when you sell something for more than you originally paid for it (or your cost basis). Short-term capital gains (assets held for under a year) are taxed at ordinary income tax rates (the income tax rate for colorado is 4.55%). If you own anything for over 12 months (meaning 12 months + 1 day), you’ll qualify for long-term capital gains which Colorado won’t charge anything on at all.

How To Calculate Your Cost Basis

Colorado Gas Tax

Colorado has a statewide sales tax of 2.9%, which is collected by the state government and local governments. In addition to the statewide sales tax, there are 65 local sales taxes in Colorado.

The Colorado gas tax is 22 cents per gallon of gasoline and 20 cents per gallon of diesel fuel. The gas tax is imposed on the sale, use, or consumption of gasoline and diesel fuel in Colorado. The gas tax is used to fund road construction and maintenance projects in Colorado.

Colorado Income Tax Return

Colorado’s individual income taxes are some of the lowest in the country, and the state offers a variety of deductions and credits to help residents lower their tax liability. If you’re a Colorado resident, you’ll need to file a state income tax return in addition to your federal return. This article will give you an overview of Colorado’s income tax rates and how to file your state return.

To file your Colorado income tax return, you’ll need to fill out Colorado Tax Forms 104. This form is available on the Colorado Department of Revenue website. You can also get it from your employer or any tax preparation software. Once you have Form 104, simply fill it out and mail it to the address listed on the form.

If you owe taxes, you can pay them online through the Colorado Department of Revenue website or by mailing a check or money order to the address listed on Form 104. If you’re due a refund

Exemptions and Deductions

There are a few exemptions and deductions that can lower your Colorado income tax bill. If you’re eligible for any of them, be sure to claim them on your return.

The first exemption is the federal poverty level exemption. If your income is below the federal poverty level, you don’t have to pay any Colorado income tax.

The second exemption is the elderly or disabled exemption. If you’re 65 or older, or if you’re permanently disabled, you can claim this exemption. You’ll need to provide proof of age or disability, such as a doctor’s letter.

The third exemption is the military exemption. If you’re a member of the US Armed Forces, you may be eligible for this exemption. You’ll need to provide proof of military service, such as a leave and earnings statement.

Finally, there are a few deductions that can lower your Colorado income tax bill. The first deduction is for taxes paid to another state. If you paid income taxes to another state, you can deduct those taxes from your Colorado income tax bill.

The second deduction is for charitable donations. If you made any charitable donations during the year, you can deduct those donations from your Colorado income tax bill.

Tips for Calculating Your Taxes

If you’re a Colorado resident, you’ll need to pay state income taxes. The good news is that Colorado has a relatively simple tax system, with just four tax brackets. The bad news is that Colorado’s income tax rates are some of the highest in the country.

Here are some tips for calculating your Colorado income taxes:

1. Know your tax bracket. Colorado’s tax brackets are 4.63%, 7.2%, 7.85%, and 8.25%. Your tax bracket depends on your taxable income – the amount of money you earn after deductions and exemptions.

2. Calculate your taxable income. To calculate your taxable income, first subtract any deductions you’re entitled to from your total income. Then, subtract any personal exemptions you’re entitled to. The resulting number is your taxable income.

3. Use the correct tax table. Colorado has different tax tables for different types of taxpayers – single, married filing jointly, head of household, and so on. Be sure to use the correct table when calculating your taxes owed.

4. Don’t forget about other taxes owed. In addition to state income taxes, you may also owe federal income taxes, Social Security taxes, and Medicare taxes. Be sure to factor these in when calculating your total tax liability

E-filing

If you’re a Colorado resident, you must file a state income tax return each year. You can choose to e-file your return, which is the electronic filing of your return via the internet.

E-filing is the fastest and most convenient way to file your Colorado income tax return. When you e-file, your return is transmitted directly to the Colorado Department of Revenue. You will also receive confirmation that your return has been received and is being processed.

If you choose to e-file, you will need to use software that is compatible with the Colorado Department of Revenue’s e-filing system. You can find a list of compatible software on the Department’s website.

Once you have completed and filed your return, you will receive a confirmation notice from the Department confirming that your return has been received and is being processed. If you owe any taxes, you will also receive information on how to make your payment.

Helpful Forms for 2022

DR 0104EP – Individual Estimated Income Tax Payment Form

DR 0366 – Rural & Frontier Health Care Preceptor Income Tax Credit Form

DR 0002 – Colorado Direct Pay Permit Application

DR 0084 – Substitute Colorado W2 Form

DR 0102 – Deceased Taxpayer Claim for Refund

DR 0104EP– 2022 Individual Estimated Income Tax Payment Form

DR 0145 – Tax Information Designation and Power of Attorney for Representation

DR 0810 – Employees Election Regarding Medical Savings Account

DR 0811 – Employees Election Regarding Catastrophic Health Insurance

DR 1059 – Exemption from Withholding for a Qualifying Spouse of a U.S. Armed Forces Servicemember

DR 1079 – Payment of Withholding Tax on Certain Colorado Real Property Interest Transfers

DR 1083 – Information with Respect to a Conveyance of a Colorado Real Property Interest

DR 1102 – Address or Name Change Form

DR 1778 – E-Filer Attachment Form

DR 1830 – Material Advisor Disclosure Statement for Colorado Listed Transaction

DR 5714 – Request for Copy of Tax Returns

DR 5782 – Electronic Funds Transfer (EFT) Program Information

DR 5785 – Electronic Funds Transfer (EFT) Account Setup for Tax Payments

Amend a Return

If you need to make changes to your Colorado income tax return after you have already filed it, you can do so by filing an amended return. An amended return must be filed within three years of the original due date of the return, or within two years of the date that the tax was paid, whichever is later. You will need to fill out and file a new Form 104, along with any other forms or schedules that have been changed. Be sure to write “Amended” at the top of the new form.

Making changes to your Colorado income tax return after you have already filed it can be done by filing an amended return. An amended return must be filed within three years of the original due date of the return or within two years from the date that the tax was paid—whichever is later. A new Form 104 needs to be filled out along with any other forms or schedules that were changed—be sure to write “Amended” at the top of the new form.

Payment Options

There are several options for paying your Colorado income taxes. You can pay online, by mail, or in person.

If you choose to pay online, you can do so through the Colorado Department of Revenue’s website. You will need to create an account and have your tax return information handy. Payment options include a credit or debit card, as well as an electronic check.

If you prefer to pay by mail, you can send your payment to the Colorado Department of Revenue at the address listed on their website. Be sure to include your return information and allow enough time for mailing and processing.

Finally, if you choose to pay in person, you can do so at any of the Colorado Department of Revenue’s offices statewide. Office locations and hours can be found on their website. Cash, check, money order, and credit or debit card are accepted forms of payment.

Conclusion

The Colorado income tax rates for 2023 have not yet been announced. However, based on the state’s current tax structure, it is expected that the rates will remain relatively unchanged from the previous year. For more information on Colorado’s income tax rates, visit the state’s Department of Revenue website.