Colorado is known for its majestic mountains and its straightforward tax system. The state utilizes a single flat tax rate, which simplifies tax calculations for its residents. However, understanding how this rate applies to your federal taxable income is key to accurately planning your finances. Our Colorado Tax Calculator is designed to provide a clear and simple estimate of your state tax liability. By entering your income and filing status, you can quickly see what you might owe the state, which is an essential step for effective budgeting and financial planning.
How to Use the Colorado Tax Calculator
Estimating your Colorado state income tax is a quick process:
- Enter Your Annual Gross Income: Input your total income for the year before any taxes or other deductions are taken out.
- Select Your Filing Status: Choose your federal tax filing status (e.g., Single, Married Filing Jointly), as this determines your federal standard deduction.
- Calculate Your State Tax: Click the "Estimate CO Tax" button to see your estimated annual state tax liability.
Understanding Colorado's Flat Tax System
Colorado's income tax system is notable for its simplicity. Unlike the complex, multi-bracket progressive systems used by the federal government and many other states, Colorado applies one single rate to all taxable income.
The Flat Tax Rate
The current state income tax rate in Colorado is a flat 4.40%. This single rate is applied to your federal taxable income, with a few minor adjustments. This means that whether you are a low-income earner or a high-income earner, the same tax rate applies to your taxable income. This structure was established by the Taxpayer's Bill of Rights (TABOR) amendment to the state constitution.
How Taxable Income is Calculated
Colorado's tax system is closely tied to the federal system. Your Colorado taxable income is your federal taxable income, which is calculated as follows:
- Start with your Gross Income.
- Subtract "above-the-line" deductions to get your Adjusted Gross Income (AGI).
- Subtract your federal Standard Deduction or your total itemized deductions to get your Federal Taxable Income.
This final federal taxable income figure is the base upon which Colorado's 4.40% tax rate is applied. Our calculator simplifies this by using your gross income and the federal standard deduction for your filing status to estimate your taxable income.
TABOR Refunds
A unique feature of Colorado's fiscal policy is the Taxpayer's Bill of Rights (TABOR). This constitutional amendment limits the amount of revenue the state government can retain and spend. When state revenue exceeds the limit set by the formula (inflation plus population growth), the excess revenue must be refunded to taxpayers.
These refunds can come in various forms, including temporary tax rate reductions, sales tax refunds, or direct checks mailed to all full-time residents. In recent years, all qualified taxpayers have received TABOR refund checks, regardless of their income level.
Frequently Asked Questions About Colorado Taxes
Does Colorado tax Social Security benefits?
It depends on your age and income. For taxpayers under age 65, Social Security benefits are taxed to the same extent they are taxed at the federal level. However, for taxpayers age 65 and older, Colorado allows for a large deduction on all retirement income, including Social Security, pensions, and IRA distributions, which often results in this income being partially or fully exempt from state tax.
What is the sales tax rate in Denver?
The total combined sales tax rate in the city and county of Denver is 8.81%. This is composed of the 2.9% Colorado state sales tax, a 4.81% city/county tax, and a 1.1% tax for the Regional Transportation District (RTD) and other cultural facilities districts.
Does this calculator include federal taxes?
No, this calculator only estimates your Colorado state income tax liability. You are also responsible for federal income tax and FICA taxes (Social Security and Medicare), which are calculated separately and represent a much larger portion of your overall tax burden.