Although Coloradans do pay a higher percentage of income in taxes than taxpayers in more than half of the other states, the state’s overall tax rate doesn’t rank among the highest or lowest in the nation. Out of the 45 states that implement state sales and use taxes, however, Colorado has the lowest tax rate, according to the legislative information website for the Colorado General Assembly. Here’s what you need to know about Colorado’s state tax rates in case they might apply to you.
|Colorado State Taxes
|Rate Range of Taxes
|0% to 11.2%
|State Sales Tax Rate Range
|2.9% to 11.2%
|State Income Tax Rate
|Flat rate of 4.63%
|State Inheritance and Estate Tax Rate
|State Property Tax Rate
|Average of 0.62%
Colorado Income Tax
The current state income tax rate in Colorado is a flat rate of 4.63 percent. That means, regardless of what tax bracket you’re in, you’ll pay the same rate. The current rate is lower than the 4.75 percent rate set in 1999, and the 5 percent rate that preceded it, according to the Taxation Division of Colorado’s revenue department.
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How to Calculate Your Colorado State Income Tax
The base for Colorado income tax is federal income tax. When federal income tax rates change, so do Colorado income tax rates. To calculate the Colorado income tax, taxpayers calculate their state taxable income by adjusting their federal taxable income via state additions and subtractions.
Then, they multiply their state taxable income by the flat tax rate of 4.63 percent and subtract any state tax credits to get their net Colorado income tax — or the amount they owe to the state.
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Colorado Sales Taxes
Colorado currently assesses its sales and use taxes at a rate of 2.9 percent, which is applied to retail-price goods and services that are taxable. When sales and use taxes were first implemented in 1935, they were set at 2 percent. They reached an all-time high in the early 1980s at 3.5 percent, finally settling at the current 2.9 percent.
Although the Colorado state sales tax rate is the lowest across the nation, when comparing both state and local government sales tax rates across the nation, its rate is close to the national average.
Colorado Property Taxes
Property taxes in the Centennial State are currently at 7.96 percent, whereas the rate for nonresidential properties is at 29 percent. Property taxes due are calculated by multiplying the actual value of the property by the assessment rate by the mill levy.
The mill levy is the rate applied to the assessed value of a property. One mill equals one dollar per $1,000 of assessed value. Taxing authorities such as school districts, city councils and county commissioners set mill levies.
Colorado Inheritance Taxes and Estate Taxes
Colorado doesn’t have an inheritance or estate tax anymore. An inheritance tax was implemented in 1927 and replaced with an estate tax in 1980. From 1980 until 2005, a tax credit was allowed for federal estate taxes called the state death tax credit — which is what the Colorado estate tax was based on. Due to legislative changes, the state death tax credit was eventually eliminated, which also eliminated the Colorado estate tax for anyone who died after Dec. 31, 2004.
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