Colorado Retirement

Colorado has become a popular retirement destination because of its beautiful scenery and outdoor recreation opportunities. Those planning to retire to Colorado will find fairly low income and sales tax rates but high property taxes.

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Colorado State Income Tax

Colorado has a flat Personal Income Tax rate of 4.63%. All income taxpayers in Colorado have to pay this tax. The amount of taxable income in Colorado is based upon the taxpayer's federal income tax return. Anybody that lives and works in Colorado for any part of the year and files a federal tax return will have to file a Colorado income tax return.

There is no inheritance tax in Colorado but estates and trusts will have to pay the state income tax.

Pension and Annuity Tax Exemption in Colorado

Colorado provides very generous tax exemptions to persons receiving income from pensions or annuities. Persons between 55 and 64 years of age can subtract the first $20,000 they receive from pensions or annuity from their taxable income. Individuals who are over 65 years old can subtract up to $24,000 of pension and annuity income from their taxable income. This subtraction applies to all pensions and annuities in Colorado. It also applies to any military retirement benefits a person receives.

Colorado Sales Tax

The Statewide Sales Tax in Colorado is 2.9% and it applies to most retail transactions. Food from grocery stores, prescription medications, real estate, construction materials, and a number of other items are not taxed by the state in Colorado. Most county, city, and town governments in Colorado impose sales taxes so the rate can be much higher in specific areas. Special districts can impose sales taxes in Colorado. Local governments in Colorado have the right to place a sales tax on groceries. Not every local government exercises this right but some do.

Persons in Colorado could be subject to another sales tax called the Consumer Use Tax if the retailer or vendor did not pay the sales tax. The consumer use tax rate is 2.9% and it can be charged on some online purchases.

Colorado Property Taxes

Property taxes on homes in Colorado are assessed and collected by county governments. Property tax rates can vary widely in Colorado because county, city, town, and special district governments all have the right to collect property taxes. Property taxes in Colorado tend to be high because they are based on assessed values. Individuals will have to contact their County Assessors' Office to see what their property tax rate is.

High Fees in Colorado

Government fees, including vehicle registration fees, can be very high in Colorado. The rates for all vehicles including trailers and RVs are higher than those in other states. Even residents of other states that live part time in Colorado could be required to pay these fees.

Taxes Could Stay Low in Colorado

Sales and income taxes in Colorado will stay low for the foreseeable future because of the state's constitution. An amendment to the state constitution requires a vote of the people for most tax increases. This effectively prevents the state legislature and local governments from increasing most tax rates.

Capital: Denver
Cost of Living Rank: #33
Sales Tax: 2.9%
Income Tax: 4.63%
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