Colorado Tax Rates

This post provides an overview of the primary taxes levied at the state level in Colorado. The information contained here is intended for general reference. For individuals or businesses seeking comprehensive support with tax filings, compliance, or strategic planning, indinero offers expert services. We encourage all who utilize this summary to explore the tailored tax support available through indinero.

Individual Income Tax

Colorado operates a flat rate individual income tax system, which means all taxable income is taxed at the same percentage, regardless of the taxpayer’s income level.

  • Tax Rate: The rate has historically been adjusted based on state revenue. For the 2025 tax year, the rate is set at 4.40% of federal taxable income, with certain Colorado modifications. Note that this rate is subject to change based on voter initiatives, such as the Taxpayer’s Bill of Rights (TABOR), which mandates refunds for excess state revenue.
  • Deductions and Exemptions: Colorado generally follows the federal guidelines for taxable income, though it allows subtractions for certain types of income, notably a portion of retirement income (pensions, annuities, and Social Security benefits) for residents aged 55 and older.

Sales and Use Tax

Colorado has one of the lowest state sales tax rates in the U.S., but the overall burden is increased by substantial local rates.

  • State Rate: The state sales tax rate is 2.9% on the retail sale of tangible personal property, certain services, and the lease or rental of tangible personal property.
  • Local Taxes: Local jurisdictions (counties, cities, and special districts) impose their own sales taxes. Due to these local additions, the combined state and local sales tax rate can vary significantly, often exceeding 8% in highly populated areas, with a total rate range reaching over 11%.
  • Exemptions: Groceries (unprepared food), prescription drugs, and medical equipment are exempt from the state sales tax.
  • Use Tax: A corresponding state use tax of 2.9% applies to items purchased outside of Colorado but stored, used, or consumed in the state if state sales tax was not paid.

Property Tax

Property taxes in Colorado are administered and collected exclusively at the local level (county, city, school district, and special district) and do not fund state services. However, the state legislature sets the assessment rates used in the calculation.

  • Assessment Rate: Property is classified by the assessor. The residential assessment rate is adjusted biennially by the legislature to maintain a balance between residential and non-residential property tax burdens. For 2025, the residential rate is projected to be around 6.25% to 7.05% of the property’s actual value, while commercial and industrial property is assessed at 29%.
  • Tax Calculation: The assessed value (actual value $\times$ assessment rate) is multiplied by the local mill levy (the local tax rate expressed as mills) to determine the tax owed. This leads to substantial variation in tax bills across counties.

Corporate Income Tax

Colorado levies a flat income tax on the net income of corporations derived from sources within the state.

  • Tax Rate: The corporate income tax rate is a flat 4.40% of Colorado net income (for the 2025 tax year), mirroring the individual income tax rate.
  • Apportionment: For corporations doing business both inside and outside of the state, Colorado uses a single sales factor apportionment method. This means that only the corporation’s sales in Colorado are used to determine the portion of the company’s total income subject to the state tax.

Unique and Excise Taxes

Colorado imposes several taxes unique to the state or specific products.

  • Retail Delivery Fee: A unique fee is imposed on all retail deliveries made by motor vehicle to a location in Colorado. This fee is comprised of several different components (e.g., clean fleet, air pollution mitigation) and is collected by the retailer from the purchaser.
  • Motor Fuel Tax: A per-gallon tax is levied on gasoline and diesel.
  • Cigarette Tax: The state imposes a high excise tax on cigarettes, currently $2.24 per pack of 20 cigarettes.
  • Marijuana Excise Tax: The state levies a 15% retail excise tax on the average market rate of retail marijuana at the time of sale from a grower to a processor or retailer. This is separate from the state and local sales taxes applied at the point of final sale.

R&D Offer Quiz

Step 1 of 3

Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.