Retirement Taxes in Colorado (2026)
Very tax-friendly. Income tax: flat 4.4%. Social Security: taxed, with a full deduction at 65+ and an income-tested deduction at 55–64. Retirement account withdrawals: same deduction applies.
Seeded with roughly 10% — about 10% effective federal plus 0%, the Colorado tax on $40,000 of IRA withdrawals at 65 under 2026 rules. Change it to your own rate.
What Colorado taxes in retirement
| State income tax | Flat 4.4% |
|---|---|
| Social Security | Taxed, with a full deduction at 65+ and an income-tested deduction at 55–64 |
| 401(k) and IRA withdrawals | Same deduction applies |
| Pensions | Deduction of $24,000 at 65+, $20,000 at 55–64, shared with any Social Security subtracted |
| Military retirement pay | Under 55, up to $15,000 exempt. From 55, folded into the $20,000-$24,000 pension deduction shared with Social Security and IRA money |
| Estate or inheritance tax | None |
| Average combined sales tax | 7.89% |
| Average effective property tax | 0.5% of home value |
Colorado technically taxes Social Security, but the retirement-income deduction wipes it out for anyone 65 or older, and since 2025 for most people aged 55–64 as well. The catch is that the Social Security subtracted counts against the same $24,000, so the deduction covers less of an IRA withdrawal than it first appears.
What the state tax actually costs you
Nothing. On a $500,000 balance withdrawn at $2,500 a month, federal tax alone brings the money down to about 18.8 years, and Colorado adds none of its own. Every dollar of state tax a retiree avoids is a dollar that stays invested and compounds, which is why the difference between states widens over a long retirement rather than staying flat.
The taxes that are not income tax
Retirees feel sales and property tax more than working-age households do, because a larger share of a fixed income goes on spending and on staying in a house that is already owned. Colorado charges an average combined sales tax of about 7.89% and levies an average effective property tax of about 0.5% of a home's value, which is well below the national average.
There is no state estate or inheritance tax, so only the federal estate tax applies and its exemption is high enough that almost no estate owes it.
How long $500,000 lasts here
Take a single 67-year-old with $500,000 in an IRA, the average Social Security check and $4,000 a month of spending. In Colorado that money runs out at 93 and 11 months, 1 month sooner than in a state with no income tax. Counting Colorado's prices as well, it runs out at 91 and 5 months. How long $500,000 lasts in every state compares all 51.
Should you move for the tax?
Compare the whole burden rather than one line of it. States without an income tax raise the money elsewhere — Texas and New Hampshire through property tax, Tennessee and Washington through sales tax — so the saving is often smaller than the headline suggests. Run your own numbers in the calculator above, then look at what the same house costs in each state, what insurance costs, and how far you would be from family and from the specialists you already use.
Establishing residency is also a formal exercise, not a preference: high-tax states audit departing retirees on days present, driver's licence, voter registration, where the primary home is, and where a doctor and a dentist are. Half-measures lose.
Frequently asked questions
Does Colorado tax Social Security benefits?
Taxed, with a full deduction at 65+ and an income-tested deduction at 55–64. Colorado is one of only eight states that still tax Social Security at all, and the income thresholds mean many retirees pay nothing. See which states tax Social Security.
Does Colorado tax 401(k) and IRA withdrawals?
Same deduction applies. Pensions are treated separately — Deduction of $24,000 at 65+, $20,000 at 55–64, shared with any Social Security subtracted.
Does Colorado tax military retirement?
Under 55, up to $15,000 exempt. From 55, folded into the $20,000-$24,000 pension deduction shared with Social Security and IRA money. See which states do not tax military retirement.
Is Colorado a good state to retire in for taxes?
Very tax-friendly on income tax. A 65-year-old single filer pays about 0% in state income tax on $40,000 a year of IRA withdrawals under the 2026 rules. Average combined sales tax is about 7.89% and effective property tax about 0.5% of home value. Estate or inheritance tax: none.
Does Colorado have an estate or inheritance tax?
No. Colorado levies neither an estate tax nor an inheritance tax, so only the federal estate tax applies, and its exemption is high enough that very few estates owe anything.
Other tax-friendly states
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SavingsLast calculators are educational estimates. They assume a constant average return and steady inflation; real markets are volatile and sequence-of-returns risk can shorten how long money lasts. Nothing here is financial, investment, tax, or legal advice. Consult a qualified professional before making decisions.
Reviewed for the 2026 tax year. Several states are part-way through scheduled rate cuts or phase-outs, and thresholds are often indexed annually — confirm current figures with the Colorado tax agency (listed at taxadmin.org) or a tax professional before acting. The effective rate is a planning figure, not a filing figure.
Printed from https://savingslast.com/retirement-taxes-in-colorado/ on . The figures reflect the inputs shown and the rules as published on that date.