Do You Need to File a Colorado Nonresident Tax Return?

If you earned income from Colorado sources during the year and you’re required to file a federal return, you have to file a Colorado nonresident tax return. The state uses Form DR 0104 along with the Part-Year Resident/Nonresident Tax Calculation Schedule (Form DR 0104PN), and it taxes only the Colorado-sourced portion of your income at a flat 4.4% rate for the 2026 tax year.¹²

When Filing Is Required

Two conditions must both be true. You had taxable income from Colorado sources, and you were required to file a federal income tax return for the same year.¹ Colorado does not set its own separate dollar threshold. If your Colorado earnings are small enough that no federal return is required, no state return is required either. But even a single day of Colorado work can pull you into filing if your total income clears the federal bar.³

The DR 0104PN is the form that does the real work for nonresidents. It runs through your income line by line and separates the Colorado piece from everything else, so the state only reaches the portion tied to it.⁴

What Counts as Colorado-Source Income

Colorado taxes nonresidents on income connected to the state. The main categories:⁵

Wages and salaries for work you physically performed while in Colorado. If your employer is based in Colorado but you work remotely from another state, those wages are generally sourced to where you sit, not where the employer is located.
Rents, royalties, and gains from real or tangible personal property located in Colorado.
Business income from operations carried on in Colorado, whether reported on your federal Schedule C or passed through from a partnership or S corporation with Colorado activity.
Capital gains from selling Colorado real estate or tangible assets in the state.

The One-Day Rule for Travel Work

Colorado effectively applies a one-day threshold. Travel to the state for a single day of work, and the wages earned that day count as Colorado-source income and can trigger a filing obligation. There is no minimum number of days and no de minimis safe harbor. Consultants, conference speakers, and anyone who occasionally travels to Colorado on business should track those days.

Investment Income Stays Out

Income from stocks, bonds, and other intangible assets is generally not Colorado-source income for a nonresident. The exception is when the intangible income is connected to a business operating in the state, such as royalties from intellectual property licensed through a Colorado-based business. Portfolio income with no operational tie to Colorado stays out of the calculation.

How the Tax Is Actually Calculated

The tax is not simply 4.4% of your Colorado income. The DR 0104PN first calculates what your Colorado tax would be if all of your income were subject to it, then multiplies that amount by the ratio of your Colorado income to your total income.⁶ The result reflects your overall income level but reaches only the Colorado share.

Because Colorado uses federal taxable income as its starting point, your federal standard deduction or itemized deductions carry into the state calculation.² Business expenses that reduce federal income flow through the same way.

High-income filers face an addback. For 2026, if your adjusted gross income tops $300,000, you must add back the portion of the federal standard or itemized deduction exceeding $1,000 (single) or $2,000 (joint).²

Withholding You’ll Run Into

Wages

Colorado employers must withhold state income tax from wages paid to nonresidents for work performed in the state, even when the employee lives elsewhere and only spends part of the year in Colorado.⁷ Check that your W-2 reflects only Colorado-source wages and the Colorado tax withheld against them. Mismatches between W-2s and returns are one of the more common audit triggers.

Real Estate Sales

Selling Colorado real estate as a nonresident triggers mandatory withholding at closing. The title company or closing agent must withhold and remit to the Department of Revenue the lesser of 2% of the sale price or the seller’s net proceeds.⁵ That amount is a prepayment against the tax on your gain.

Several situations remove the requirement:⁸

The sale price is under $100,000.
The property was acquired by a lender through foreclosure or deed in lieu of foreclosure.
The seller signs a sworn affirmation certifying Colorado residency, principal-residence status, or that no tax will be owed on the sale. The closing agent can rely on the affirmation in good faith.

If the withholding turns out to exceed the actual tax on the gain, you claim the overpayment on your Colorado return and get a refund. That happens often when the property sold at a loss or the gain was modest against the sale price.

Estimated Payments

Expect your Colorado tax bill, net of withholding and credits, to top $1,000? You must make quarterly estimated payments.⁵ This catches nonresidents with rental income, business profits, or other Colorado income that isn’t withheld at the source. Underpayment carries its own interest charge on top of any late-payment penalty, so it’s worth running the numbers early.

Credits Nonresidents Can and Can’t Claim

Two credits that sound like they should apply to nonresidents don’t:

The Colorado Earned Income Tax Credit, equal to a percentage of the federal EITC (25% for 2026 and later), is available only to full-year and part-year Colorado residents.⁹
The state Child Care Expenses Tax Credit explicitly excludes nonresident filers.

Federal deductions still flow through, as described above, so the main way to reduce your Colorado tax is on the deduction side rather than through state-specific credits.

Military Spouse Exemption

Under the federal Military Spouses Residency Relief Act, the spouse of an active-duty servicemember present in Colorado solely to accompany the servicemember can exempt Colorado-earned income (wages, salaries, and unemployment compensation) from state tax. The spouse must be a legal resident of another state. To stop withholding at work, file Form DR 1059 with the employer.¹⁰

What Late Filing or Late Payment Costs

Colorado combines late filing and late payment into a single penalty: the greater of $5 or 5% of the unpaid tax, plus 0.5% for each additional full or partial month, capped at 12% of the unpaid tax.¹¹

Interest runs on top of that from the original due date until you pay. For 2026, the discounted rate is 8%, which applies if you pay before the Department issues a Notice of Deficiency or within 30 days after receiving one. Miss that window, and the rate rises to 11%.¹¹ At those rates, even a few months of delay adds real money. If you know you’ll owe but can’t pay in full by the deadline, file on time and pay what you can; that keeps the penalty smaller.

If the Department Audits You

The Department of Revenue can audit nonresident returns for underreported Colorado income, mismatches between state and federal filings, and missed returns. Expect requests for pay stubs, rental agreements, business records, and documentation showing how you split income between Colorado and your home state.

The state generally has one year after the federal statute of limitations expires to assess additional tax. Since the IRS normally has three years from your filing date, that gives Colorado about four years from the date you filed. If you never file, or file a fraudulent return, no time limit applies.

Disagree with the outcome? You have 30 days from the mailing date of the Notice of Deficiency to file a written protest. That deadline is strict.¹² The protest first goes to the Department’s Tax Conferee Section for informal resolution; unresolved cases move to a formal hearing before the Executive Director of Revenue.¹³ A further appeal to Colorado District Court is available within 30 days of the Executive Director’s final determination.¹⁴ Most disputes that reach a formal hearing turn on how income was apportioned between states, which is why keeping clean records of your Colorado days, income, and expenses from the beginning is the best protection.

1
Department of Revenue – Taxation. Part-Year and Nonresident
2
Department of Revenue – Taxation. Individual Income Tax Guide
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Department of Revenue – Taxation. Individual Income Tax Filing Requirements
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Department of Revenue – Taxation. DR 0104PN – Part-Year Resident/Nonresident Calculation Schedule
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Department of Revenue – Taxation. Income Tax Topics: Part-Year Residents and Nonresidents
6
LII / Legal Information Institute. 39-22-110 – Apportionment of Tax for Part-Year Residents and Nonresident Individuals
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Justia Law. Colorado Revised Statutes Title 39 – Taxation – Section 39-22-604 – Withholding Tax
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Justia Law. Colorado Revised Statutes Section 39-22-604.5 – Withholding Tax – Transfers of Colorado Real Property – Nonresident Transferors
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Department of Revenue – Taxation. Colorado Earned Income Tax Credit (COEITC)
10
Department of Revenue – Taxation. Income Tax Topics: Military Servicemembers
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Department of Revenue – Taxation. Tax Topics: Penalties and Interest
12
Department of Revenue – Taxation. Protest Rights and Process
13
Department of Revenue – Taxation. Taxation Disputes
14
Justia Law. Colorado Revised Statutes Section 39-21-105 – Appeals