Colorado state income tax applies to both residents and non-residents who earn income within the state. Here’s what you need to know.
Who has to file a Colorado tax return?
You must file a Colorado income tax return if:
- You’re a resident of Colorado and have to file a federal tax return
- You have income subject to Colorado income tax and made enough to owe Colorado income tax. This includes non-residents with Colorado income and part-year residents.
Does Colorado tax retirement income?
In Colorado, Social Security benefits, military retirement pay, and certain other types of retirement income are exempt from state income tax. However, other forms of retirement income such as pension income and distributions from 401(k) or IRA accounts are subject to Colorado state income tax.
How much is Colorado income tax?
Starting in 2022, Colorado’s income tax rate is a flat 4.40%. It was previously 4.55%.
A flat rate means that you pay the same amount on all of your income. There are no tax brackets in Colorado.
There is a standard deduction similar to the federal standard deduction. You only get taxed on income above your standard deduction and other deductions.
When are Colorado tax returns due?
Colorado tax returns are due on April 15th, which is the same as the federal tax filing deadline. However, if the 15th falls on a weekend or holiday, the deadline is extended to the next business day.
If you are owed a refund, filing your tax return early can help you get your Colorado tax refund faster. The state typically processes refunds within four to six weeks of receiving your tax return. However, if you file closer to the deadline, you may experience delays due to the increased volume of returns being processed.
What happens if you don’t file?
If you don’t file your Colorado tax return by the deadline, you may be subject to penalties and interest. The penalty for failing to file is 5% of the tax owed per month, up to a maximum of 25%. Interest is also charged on any unpaid tax.
Common Colorado Tax Credits and Deductions
Some common deductions and credits for Colorado taxes include:
- Earned Income Tax Credit (EITC): Colorado offers an EITC for low to moderate-income taxpayers. The credit is based on your federal EITC and ranges from 10% to 25% of the federal credit amount.
- Child and Dependent Care Credit: If you paid for child or dependent care so you could work, you may be eligible for a credit of up to 50% of your federal credit amount.
- Colorado Child Care Contribution Credit: If you contributed to a qualifying Colorado child care facility, you may be eligible for a credit of up to 50% of your contribution amount.
- Property Tax/Rent/Heat Credit: If you are a low-income senior or disabled person, you may be eligible for a credit based on your property taxes or rent and heating expenses.
Additionally, Colorado allows taxpayers to deduct contributions made to the state’s 529 college savings plan from their state taxable income. The state also offers a tax credit of up to $500 per year for donations to qualifying charitable organizations.