Financial planning in Colorado
A flat rate that moves with the state's surplus, and generous retirement subtractions.
Direct answer
Colorado's income tax is a flat 4.40%, reduced to 4.25% for 2025 by the TABOR surplus mechanism, which can lower the rate year to year. Retirees get more than most flat-tax states offer: a pension and annuity subtraction of $20,000 from age 55 and $24,000 from 65, and Social Security fully subtractable from 65 — extended to ages 55–64 below an income limit from 2025. Colorado also has one of the largest 529 deductions in the country. For a Denver household the planning is about sequencing retirement income to use those subtractions and knowing the rate can change.
Colorado tax treatment
Figures are for tax year 2025, each read from the source beside it. Thresholds and rates are revised regularly; confirm the current year before acting on any of them. What these rules change in a household’s plan, from the order accounts are drawn to the timing of Roth conversions, is set out in the retirement tax planning overview.
The statutory rate is 4.40%. The TABOR surplus mechanism reduced it to 4.25% for tax year 2025, and a temporary reduction can apply in any year through 2034 in which the state has excess revenue, so the rate for a given year is not known until that year's surplus is.
Taxpayers aged 55 to 64 can subtract up to $20,000 of pension and annuity income and those 65 and older up to $24,000. From 65 the full amount of Social Security included in federal taxable income is subtractable, and from tax year 2025 that full subtraction also applies at 55 to 64 for filers with adjusted gross income of $75,000 or less ($95,000 filing jointly).
For a Colorado household the number that matters at death is the federal exclusion, $15 million per person for deaths in 2026. Colorado's own estate tax return relates to an earlier federal credit regime; we do not make a claim about it here beyond that, because the state's own publications on the point are not something we could verify directly.
Worth doing here
Things that are worth doing in Colorado that would not be worth doing, or would work differently, somewhere else.
Contributions to a Colorado CollegeInvest 529 account can be subtracted up to $25,400 per beneficiary for a single filer and $38,100 for a joint return in 2025 — far above what most states allow.
Because the pension and annuity subtraction starts at 55 rather than at retirement, someone who stops working early can draw up to $20,000 a year of qualifying income state-tax-free for a decade before the higher $24,000 amount and the Social Security subtraction arrive at 65.
The TABOR mechanism means the rate you pay depends on the state's surplus that year. Planning that spreads income across years should assume the 4.40% statutory rate and treat a reduction as upside.
Federal and state, together
At roughly 4.25%–4.40%, Colorado income tax on a high income plus Front Range property tax can approach the federal deduction cap, and above $500,000 of modified adjusted gross income the cap shrinks toward $10,000.
The federal deduction for state and local taxes is $40,400 for tax year 2026 and begins to shrink above $500,000 of modified adjusted gross income, down to a floor of $10,000, and is scheduled to return to $10,000 after 2029. The federal estate tax exclusion is $15,000,000 per person for deaths in 2026. IRS, Instructions for Schedule A (2025), line 5e; IRS, tax year 2026 inflation adjustments (Rev. Proc. 2025-32).
Cities
Each city page covers what is local — how households there tend to be paid, what the first meeting usually covers — and inherits this state layer.
Denver's employment base runs through aerospace and defence, energy, healthcare and a growing technology sector, with a large federal workforce at the Denver Federal Center and a concentration of publicly traded headquarters along the Front Range.
Colorado Springs is one of the most military cities in the country, home to Fort Carson, Peterson and Schriever Space Force Bases and the Air Force Academy, with the defense contractors and the Space Force headquarters functions that follow them, alongside a growing healthcare and technology sector.
Boulder is paid by the University of Colorado, by the federal laboratories (NIST, NOAA and NCAR among them), by a dense technology and aerospace start-up scene and the public companies that acquire from it, and by the natural-products and outdoor industries.
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Common questions
A flat 4.40% by statute, reduced to 4.25% for tax year 2025 by the TABOR surplus mechanism. A temporary reduction can apply in any year through 2034 in which the state runs a surplus.
Not from age 65: the full amount included in federal taxable income is subtractable. From tax year 2025 the same full subtraction applies at ages 55–64 for filers with adjusted gross income of $75,000 or less ($95,000 filing jointly).
Yes, above the pension and annuity subtraction: up to $20,000 a year can be subtracted from age 55 and up to $24,000 from age 65.
No. Flames Financial Planning is based in Minnetonka, Minnesota, and serves Colorado households through a virtual planning relationship. This page describes the service area and does not claim a Colorado office.
Yes. State tax treatment shapes withdrawal order, Roth-conversion timing, and where investments are best held. Planning includes tax guidance and review of a completed return; Premier adds tax projections and preparation and filing through an independent tax partner.
Next step
A discovery meeting covers your situation, what you pay now, and whether a fixed quarterly membership is a better fit.
