Tax
Colorado income tax rate (2026): what tech employees pay
Colorado is one of the simpler states to pay income tax in and one of the more confusing to read about. The rate is flat, yet it has changed in four of the last six tax years because of a constitutional refund mechanism most newcomers have never heard of. This is the current guide (the page address dates from an earlier edition): the 2026 rate and how it got there, what Colorado adds to and subtracts from your federal numbers, how RSU vests are withheld, where the local "head taxes" come from, and what a Denver engineer earning $250,000 with $100,000 of vesting stock actually owes.
- The Colorado income tax rate, by tax year
- Why Colorado has no tax brackets
- Where the math starts: federal taxable income, plus and minus
- TABOR refunds: what to expect
- Denver and other occupational privilege taxes
- How RSU vests and bonuses are withheld for Colorado
- Estimated payments
- Worked example: $250,000 salary plus $100,000 of RSU vests
- Common mistakes
The Colorado income tax rate, by tax year
Colorado taxes individuals at a single flat rate on Colorado taxable income. The Department of Revenue publishes the rate for each year in its Individual Income Tax Guide:
| Tax year | Rate | Note |
|---|---|---|
| 2020 | 4.55% | |
| 2021 | 4.50% | |
| 2022 | 4.40% | Statutory rate from this year on |
| 2023 | 4.40% | |
| 2024 | 4.25% | One-year TABOR reduction under SB 24-228 |
| 2025 | 4.40% | No reduction triggered |
| 2026 | 4.40% | Expected; see below |
The 2026 figure needs one caveat. The Department had not posted a 2026 row in its table at the time of writing. The rate can only fall below 4.40% if the state collected a large enough TABOR surplus in the fiscal year that ended June 30, 2026, and Legislative Council Staff's September 2026 forecast reports that the state collected no TABOR surplus in FY 2025-26. Absent new legislation, 4.40% is the 2026 rate.
Why Colorado has no tax brackets
If you searched for "Colorado tax brackets," the answer is that there are none. Every dollar of Colorado taxable income is taxed at the same rate, so your marginal and average rates are both 4.40%. The federal side is where the brackets and surprises live; our RSU tax guide covers that layer.
The rate moves because of the Taxpayer's Bill of Rights (TABOR), a 1992 constitutional amendment that caps how much revenue the state may keep; the excess must be refunded. SB 24-228 set the refund order for tax years 2024 through 2034: first, reimbursements to local governments for senior and veteran property tax exemptions; second, a temporary income tax rate cut; third, a sales tax refund paid through the income tax return. The rate cut only fires when the remaining surplus exceeds $300 million, and it scales from 0.04 percentage points (surplus between $300 million and $500 million) to 0.15 points (surplus above $1.5 billion). So the realistic range for the rate in any year is 4.25% to 4.40%. Plan around 4.40% and treat anything lower as a bonus.
Where the math starts: federal taxable income, plus and minus
Colorado has no definition of income of its own. Line 1 of the Colorado return is your federal taxable income (after the standard or itemized deduction), and the state then requires certain additions and allows certain subtractions. For a tech employee these are the ones that matter.
Additions that hit high earners
- The deduction addback. For tax years 2023 and later, a single or joint filer whose federal adjusted gross income exceeds $300,000 must add back the amount by which their federal deduction (itemized or standard) exceeds a cap. For 2023 through 2025 the cap is $12,000 single and $16,000 joint. For 2026 and later the Department's guide lists it at $1,000 single and $2,000 joint, so a $300,000-plus household gives back nearly its whole federal deduction. A single filer taking the 2026 standard deduction of $16,100 (Rev. Proc. 2025-32) adds back $15,100.
- State income tax deducted on Schedule A, if you itemize (the deduction addback is reduced by any amount already added back here).
- The qualified business income addback. Single filers with AGI over $500,000 and joint filers over $1,000,000 add back the federal Section 199A deduction. Relevant if you consult on the side.
- Interest on other states' municipal bonds, federally exempt but taxable in Colorado.
Subtractions worth knowing
- Retirement income. Taxpayers age 55 to 64 may subtract up to $20,000 of taxable pension, annuity, IRA and 401(k) income each year, and taxpayers 65 and older up to $24,000, per the Department's Income Tax Topics publication. Distributions that are "premature" federally (subject to the 10% additional tax) do not qualify. Since 2022, those 65 and older subtract all federally taxable Social Security; since 2025, those 55 to 64 can too if AGI is at or below $75,000 single or $95,000 joint. This matters for Roth conversions after leaving tech; see our guide for retired tech professionals.
- Interest on U.S. Treasury obligations, which Colorado does not tax.
- CollegeInvest 529 contributions and charitable gifts above $500 for standard-deduction filers, each subject to limits in the guide.
TABOR refunds: what to expect
The sales tax refund is what people picture when they say "TABOR check." Despite the name it has nothing to do with what you spent; it is a fixed amount claimed on the Colorado return by full-year residents who file by October 15 of the following year. When the refundable amount is small, everyone gets the same figure; when it is large, six income tiers apply and joint filers receive double. The Department's TABOR page and the DR 0104 instructions carry the official amounts.
- Tax year 2024 (filed in 2025): rate cut to 4.25% plus a six-tier sales tax refund.
- Tax year 2025 (filed in 2026): no rate cut. Legislative Council's September 2025 forecast, as reported by CBS Colorado, put the refund at $20 to $62 for single filers by income tier, double for joint (reported; confirm in your 2025 booklet).
- Tax year 2026 (filed in 2027): no FY 2025-26 surplus, so expect no refund and no rate cut.
Denver and other occupational privilege taxes
Colorado has no local income taxes, but several Denver-area cities charge a flat monthly occupational privilege tax (OPT, the "head tax") on people who work inside city limits. It is withheld from your paycheck and matched by your employer. Where you work is what counts, not where you live.
| City | Employee pays | Employer pays | Applies when monthly earnings in the city are |
|---|---|---|---|
| Denver | $5.75 per month | $4.00 per month | At least $500 |
| Greenwood Village | $2.00 | $2.00 | At least $250 |
| Glendale | $5.00 | $5.00 | More than $750 (as reported by Metro Denver EDC) |
| Aurora | Repealed effective January 1, 2025 | ||
For a Denver worker that is $69 a year.
How RSU vests and bonuses are withheld for Colorado
Colorado stopped publishing withholding tables in 2022. Employers compute withholding on every paycheck with the DR 1098 worksheet, which for 2026 works like this: annualize the wages on the check, subtract an annual allowance ($5,500 for single filers, $11,000 for married filing jointly, or the amount on your Colorado DR 0004 certificate), multiply by 4.40%, divide back to the pay period, and add any extra per-check amount you requested.
Bonuses, commissions and the value of RSUs at vest are all wages under the state's Wage Withholding Tax Guide, and Colorado publishes no separate supplemental-wage rate. A vest runs through the same worksheet, so Colorado withholding on RSUs is effectively 4.40% of the share value, which is also the tax you owe. Colorado almost never produces an RSU surprise at filing time.
The federal side does. Employers may withhold a flat 22% on supplemental wages up to $1 million a year and must withhold 37% above that (IRS Publication 15), so anyone in the 32% or 35% bracket is under-withheld on every vest. Our RSU tax calculator estimates the gap.
Estimated payments
Colorado requires quarterly estimates if your Colorado tax after withholding and credits will exceed $1,000. Per the guide, the required annual payment is the lesser of 70% of the current year's net tax or 100% of the prior year's (110% if federal AGI exceeds $150,000), paid in four installments due April 15, June 15, September 15 and January 15. The underpayment penalty is really interest, 11% annually for 2026, and there is none on the January installment if you file and pay in full by January 31.
W-2 employees with salary and RSUs rarely need Colorado estimates. The people who do: 1099 contractors (see our solo 401(k) deadlines guide), anyone selling a large block of appreciated company stock, and anyone whose spouse has untaxed income.
Worked example: $250,000 salary plus $100,000 of RSU vests
A single engineer lives and works in Denver in 2026. Salary is $250,000, RSUs worth $100,000 vest during the year, she defers the maximum $24,500 pre-tax to her 401(k) (IRS Notice 2025-67), and she takes the federal standard deduction.
| Line | Amount |
|---|---|
| Gross wages (salary plus RSU vest value) | $350,000 |
| Less pre-tax 401(k) deferral | -$24,500 |
| Federal AGI (W-2 Box 1 wages) | $325,500 |
| Less 2026 standard deduction, single | -$16,100 |
| Federal taxable income (Colorado starting point) | $309,400 |
| Add back: standard deduction above the 2026 $1,000 cap (AGI exceeds $300,000) | +$15,100 |
| Colorado taxable income | $324,500 |
| Colorado tax at 4.40% | $14,278 |
| Colorado withholding: 4.40% of ($325,500 - $5,500 allowance) | about $14,080 |
| Balance due with the return | about $198 |
| Denver employee OPT (separate, via payroll) | $69 |
Two things stand out. The state effectively taxes her entire AGI once the addback applies; "flat 4.4%" really means 4.4% of almost everything. And withholding lands within a couple hundred dollars of the bill with no effort. Federally, her last dollars are taxed at 35% (the 2026 single bracket starts at $256,225 of taxable income) while her RSUs were withheld at 22%, leaving roughly $13,000 of federal tax uncovered on the vests. Had she moved to Colorado mid-year, the RSU income would be apportioned between states by where the work was performed during the vesting period, a part-year question worth professional help.
Common mistakes
- Searching for Colorado brackets and applying another state's. There are none; use 4.40% on Colorado taxable income.
- Forgetting the deduction addback. Above $300,000 of AGI, Colorado claws back most of your federal deduction, and from 2026 the cap is only $1,000 single or $2,000 joint.
- Budgeting a TABOR refund. It can be $0.
- Assuming Colorado under-withholds RSUs the way the IRS does. The gap is federal; run it in the RSU calculator.
- Missing the retirement subtraction after leaving tech. Up to $20,000 (age 55 to 64) or $24,000 (65 and older) of IRA and 401(k) distributions is Colorado tax free each year, per person.
- Skipping estimates after a big stock sale. Selling $300,000 of appreciated company stock creates roughly $13,000 of Colorado tax that nobody withheld.
Bottom line. Colorado's income tax is a flat 4.40% of federal taxable income after state adjustments, with a one-year dip to 4.25% in 2024 and no reduction expected for 2026. High earners lose most of their federal deduction through the addback, RSUs are withheld correctly at the state level but not the federal one, and the only local wrinkle is a few dollars a month of occupational privilege tax where you work. For the broader strategy once income clears $300,000, see specialized financial planning for high earners.
Rates, caps and refund amounts change with each legislative session and each TABOR forecast. Before you file, confirm the current-year figures in the Colorado Department of Revenue's Individual Income Tax Guide and the DR 0104 instructions, and the federal figures in the IRS revenue procedure for the year.