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Colorado State Taxes: What You’ll Owe in the 2026 Tax Season

Valerie Bauman,

Updated March 17, 2026

AARP

Published March 23, 2025

/ Updated March 17, 2026

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Colorado assesses a flat income tax; the rate is 4.4 percent. Colorado has the lowest sales tax (2.9 percent) of the 45 states that levy one, according to the Tax Foundation.

The big picture:

Income tax: 4.4 percent flat income tax.
Property tax: 0.5 percent of a home’s assessed value, according to the Tax Foundation’s most recent data.
Sales tax: Colorado has a statewide sales tax of 2.9 percent. Additionally, the average local sales tax rate is 4.99 percent in 2026, according to the Tax Foundation’s most recent data.

How is income taxed?

Income is taxed at a flat 4.4 percent. Some jurisdictions also have their own local income taxes.

What about investment income?

Capital gains are taxed like other income, at a flat 4.4 percent rate.

Are Social Security benefits taxed?

Colorado does not tax Social Security benefits for single filers age 55 to 64 if their adjusted gross income is less than or equal to $75,000, or for people married and filing jointly, less than or equal to $95,000. People age 65 and older pay no tax on Social Security, with no income limitations.

How is property taxed?

Colorado had an average property tax rate of 0.5 percent of a home’s assessed value, according to the Tax Foundation’s most recent data. On top of that, local property tax rates ranged from a low of 0.22 percent in Jackson County to a high of 0.66 percent in Broomfield and Adams counties. Actual property payments vary by county. The lowest median property tax was $416 in Jackson County. The highest median tax was $4,074 in Pitkin County.

What about sales and other taxes?

Sales tax: Colorado has a statewide sales tax of 2.9 percent. Additionally, the average local sales tax rate is 4.99 percent in 2026, bringing the average combined sales tax to 7.89 percent. To look up your sales and use tax rates, go here. Exemptions to sales tax: Groceries, electricity or fuel for residential use, diapers and incontinence products and renewable energy components are exempt. See a broader list of exemptions here.

Gas and diesel: Gasoline is taxed at 22 cents per gallon. Diesel is taxed at 20.5 cents per gallon.

Vehicle tax: Motor vehicle sales are subject to state and state-administered local sales and use taxes. Which local taxes apply depends on the city, county and special district(s) in which the vehicle will be registered, the purchaser’s residence and the location of the sale. Car owners will also have to pay an annual ownership tax on their vehicles, which varies based on the age of the automobile. The first year for a new car, the tax assessment is 2.1 percent of the assessed value. The second year it’s 1.5 percent, the third year it’s 1.2 percent, and the fourth year it’s 0.9 percent. In years five through nine, the tax rate is 0.45 percent of assessed value or $10, whichever is greater. From the 10th year on, the tax is $3.

Alcohol: Beer, hard cider and malt liquor are taxed at 8 cents per gallon; wine is taxed at 7.33 cents per liter; and spirits are taxed at 60.2 cents per liter.

Lottery: Lottery winnings are taxed to the extent they are included in federal taxable income. All taxable income, including gambling winnings, is subject to the state’s 4.4 percent income tax rate.

Will my heirs or estate have to pay inheritance and estate tax?

No, the state doesn’t impose an estate or inheritance tax.

Are there any tax breaks for older residents?

Senior property tax exemption: This exemption is available, when the state’s budget allows, to people 65 and older and their spouses. For qualified applicants, 50 percent of the first $200,000 of actual value of the primary residence is exempted. To qualify, residents must be 65 or older on Jan. 1 of the year they apply. The resident or spouse must have owned and occupied the property for 10 years or more.
Property tax/rent/heat credit rebate: This rebate is available to residents with low incomes who are older or have disabilities and need help with their property tax, rent or heat expenses. Applicants must be age 65 or older, a surviving spouse age 58 or older, or disabled and unable to engage in any substantial gainful activity for medical reasons. For single filers, gross income for the year must be less than $19,094. For married filers, gross income for the year must be less than $25,788.
Pension and Annuity Subtraction: Individuals age 55 and older may be eligible to have a portion of their pensions subtracted from their state taxes. The subtraction is generally limited to $20,000 each year or, for individuals age 65 or older, $24,000. In the case of joint filers, the subtraction is allowed separately to each taxpayer included in the joint return. Learn more about applying for this benefit here.

Are military benefits taxed?

A retired service member may claim one of two subtractions for all or part of the military retirement benefits that are included in their federal taxable income. The subtraction that may be claimed depends on the retired service member’s age at the end of the tax year. For those under 55 years of age at the end of the tax year, retirees are able to get up to a $15,000 subtraction on their state income tax. Those 55 and older can claim the regular pension and annuity subtraction, which is $20,000 for those under 65, and $24,000 for those 65 and older.

What is the deadline for filing taxes in 2026?

April 15, 2026.

More AARP Financial Resources

AARP Retirement Calculator Determine if you are saving enough to retire when — and how — you want.
AARP’s Social Security Calculator Figure out when to claim and how to maximize your Social Security benefits.
AARP Tax Tools Explore resources to help you calculate and prepare taxes.

Valerie Bauman is a journalist and author with two decades of experience working for publications, including Newsweek, Bloomberg and The Associated Press. Throughout her career, she’s covered politics and the law, including pharmaceutical litigation, mass torts and election law.