The Colorado state income tax rate is a flat 4.40% on all taxable income for individuals and corporations, the lowest permanent rate in the state’s history.1Colorado Department of Revenue. Individual Income Tax Guide Colorado is one of 14 states that apply a single rate to every dollar of taxable income rather than graduated brackets, and that rate has only moved in one direction since 1987: down.
How Colorado Got to 4.40%
Colorado started collecting an income tax under the Income Tax Act of 1937, using graduated brackets that topped out at 10%.2Colorado General Assembly. Individual Income Tax That structure lasted 50 years.
In 1987, the legislature replaced the brackets with a single flat rate of 5% on all individual taxable income.2Colorado General Assembly. Individual Income Tax The 5% figure held for over a decade. Then lawmakers cut it twice in quick succession: to 4.75% in 1999 and to 4.63% in 2000.3Colorado General Assembly. Corporate Income Tax The 4.63% rate then stayed put for twenty years, through recessions and political turnover alike.
The two most recent cuts came from voters, not legislators. Proposition 116 in November 2020 permanently reduced the rate from 4.63% to 4.55%, retroactive to January 1, 2020.3Colorado General Assembly. Corporate Income Tax Two years later, Proposition 121 dropped it again to 4.40% starting with tax year 2022, passing with about 65% of the vote.4Colorado General Assembly. Proposition 121 – State Income Tax Rate Reduction That 4.40% rate remains in place for tax year 2025, with no further permanent reductions currently enacted.1Colorado Department of Revenue. Individual Income Tax Guide
The full permanent-rate timeline under the flat tax:
- 1987–1998: 5.00%
- 1999: 4.75%
- 2000–2019: 4.63%
- 2020–2021: 4.55% (Proposition 116)
- 2022–present: 4.40% (Proposition 121)
On $100,000 of Colorado taxable income, the state’s take has fallen from $5,000 in 1987 to $4,400 today.
Temporary Rate Reductions Under TABOR
The permanent rate is not always the rate you actually pay. When Colorado collects more revenue than its constitutional spending cap allows, the state must return the excess, and one of the tools it uses is a temporary income tax rate reduction. For tax years 2019 through 2021, both individual and corporate rates were temporarily reduced to 4.50% to refund a Taxpayer’s Bill of Rights surplus.3Colorado General Assembly. Corporate Income Tax
SB24-228, enacted in 2024, formalized this approach for tax years 2024 through 2034. If remaining excess revenues top $300 million, a temporary income tax rate reduction triggers, potentially lowering the effective rate by anywhere from 0.04 to over 0.13 percentage points below the permanent 4.40%.5Colorado General Assembly. SB24-228 TABOR Refund Mechanisms Larger surpluses also route refunds through sales tax reductions and direct sales tax refunds. Smaller surpluses use only the direct sales tax refund. Taxpayers now claim any refund by checking a box on their state income tax return rather than waiting for a separate check.
Why the Rate Only Moves Down
The Taxpayer’s Bill of Rights, added to the state constitution as Article X, Section 20 in 1992, is the reason the rate history is one-directional.6Colorado General Assembly. TABOR TABOR requires advance voter approval for any new tax, any tax rate increase, or any policy change that directly results in higher net tax revenue.7FindLaw. Colorado Constitution Art X, Sect 20 The legislature cannot raise the income tax rate on its own, regardless of majority size. It also caps annual state spending growth at inflation plus population change, and collections above that cap must be returned.
Rate cuts, by contrast, can happen either through legislation (as in 1999 and 2000) or through a ballot measure (as in 2020 and 2022). That asymmetry is why every permanent change since 1987 has been a reduction.
What the 4.40% Rate Actually Applies To
Colorado uses rolling conformity with the federal tax code. Your Colorado taxable income starts with the federal taxable income figure from your Form 1040, and the state then applies specific additions and subtractions before the 4.40% rate hits.
The most common addition for individual filers is the state income tax addback. If you itemize on your federal return and deduct state income taxes, Colorado requires you to add that amount back to your state taxable income.8Colorado Department of Revenue. Income Tax Topics – State Income Tax Addback Deductions for sales taxes, local income taxes, property taxes, and personal property taxes do not have to be added back. The addback is also capped: it cannot exceed the amount by which your total itemized deductions exceeded the standard deduction you would have otherwise claimed.
Who Has to File in Colorado
Any Colorado resident whose income requires a federal return generally has to file a state return as well. Nonresidents face a stricter threshold. If you earn any income from Colorado sources, even from a single day of work in the state, a nonresident return is required. Colorado does not offer a de minimis exception for short visits or small amounts of income, which regularly catches remote workers and traveling professionals off guard. The flat rate means there is no bracket to manage, but the filing obligation itself is what most people miss.