What Changes in Your Paycheck in Colorado
Your paycheck in Colorado shows a Colorado state income tax line item at a flat 4.5% rate—the same percentage whether you earn $1 or $1. For a $1 salary, that's ~ $1 annually (~ $1 per biweekly paycheck). Colorado paychecks only show state and federal tax deductions—no local income tax line items. The flat rate means your state tax increases linearly with income, unlike progressive states where tax increases accelerate with higher brackets Retirees 65+ see no state tax on retirement income distributions, making Colorado attractive for those relying on retirement savings.
Example State Tax in Colorado
What you'll pay in Colorado state income tax at different salary levels (single filer, no deductions):
| Gross Salary | State Tax (Year) | Effective Rate |
|---|---|---|
| $50,000 | $2,250 | 4.5% |
| $75,000 | $3,375 | 4.5% |
| $100,000 | $4,500 | 4.5% |
| $150,000 | $6,750 | 4.5% |
Use the calculator above to see your exact take-home pay with your filing status and deductions.
Is Colorado Better for You?
Colorado works well for:
Colorado works well for high earners who benefit from the flat rate structure. In states with progressive brackets, someone earning $1 might pay 6%-8% effective state tax. In Colorado, that same person pays a flat 4.5%, resulting in lower total state tax. The relatively low 4.5% rate makes Colorado attractive for all income levels compared to higher flat-tax states. Retirees 65+ also benefit from exemptions on Social Security and most retirement income, making Colorado attractive for those relying on retirement savings.
Colorado may not be ideal if:
Colorado is relatively favorable for most income levels due to its low flat rate (4.5%), but lower-income workers might pay more than in progressive states with generous low-income brackets or zero-tax states. A $1 earner pays $1 annually (4.5%), while the same earner in a progressive state with a 0% or very low bracket on the first portion of income might pay less. If you're early in your career or earning below median income, you might keep more net pay in states with progressive brackets that exempt low-income earners or in zero-tax states However, Colorado's 4.5% rate is competitive even for lower earners compared to other flat-tax states.
Common Mistakes People Make
Misconception: 'Flat tax means low tax.' Colorado's 4.5% flat rate is actually one of the lower flat tax rates—lower than Illinois (4.95%), Massachusetts (5.0%), and comparable to or lower than many progressive states' effective rates for high earners. For someone earning $1, that 4.5% is $1, which can be competitive with progressive states depending on income level. However, it's still not necessarily 'low' compared to states with zero income tax or very low flat rates like Pennsylvania (3.07%).
Misconception: 'No local taxes means Colorado is cheaper than other states.' While Colorado avoids local income tax complications, the flat 4.5% rate combined with sales taxes (which vary by locality, with total rates ranging from 4% to 8.31%) and property taxes can still create a tax burden. A high earner in Colorado pays 4.5% income tax, while a high earner in a zero-tax state pays 0% income tax, though they may pay higher sales or property taxes. Factor in all taxes when comparing states.
Misconception: 'Everyone pays the same percentage, so it's fair.' While everyone pays the same 4.5% rate in Colorado, the economic impact is different. 4.5% of a $1 salary ($1) represents a larger share of disposable income than 4.5% of $1 ($1). Flat taxes are proportionally equal, but not necessarily equitable in terms of real-world impact on people's financial lives—lower earners pay a larger percentage of their ability to cover necessities, while high earners benefit from not being pushed into higher brackets like they would be in progressive states.
Colorado Income Tax Rate
4.50% flat rate
Everyone pays 4.50% of taxable income, regardless of income level or filing status.
Key Facts That Affect Your Take-Home Pay
- Colorado uses a flat 4.5% income tax rate for all income levels and filing statuses—unlike federal taxes or states with graduated brackets, your Colorado tax percentage stays the same whether you earn $1 or $1. This flat rate is one of the lower flat tax rates in the nation, making Colorado attractive for all income levels.
- Colorado's flat tax rate means everyone pays the same 4.5% rate regardless of income level, creating a simple but potentially regressive system where lower earners pay a larger percentage of their take-home pay toward state tax than higher earners. However, the 4.5% rate is lower than most flat-tax states like Illinois (4.95%) or Massachusetts (5.0%).
- Colorado does not collect income taxes from municipalities, ensuring the same tax rules apply statewide. All Coloradans have the same income tax burden—the flat 4.5% state rate.
One Thing to Know
Colorado's flat 4.5% rate means a $1 earner and a $1 earner pay the exact same percentage—which feels fair on paper but hits lower earners harder in practice. Many people don't realize this until they compare their effective tax burden to friends in progressive states.
Important Notes
These calculations are estimates based on current tax law. Your actual take-home pay varies based on:
- Pre-tax deductions (401(k), health insurance, HSA, etc.)
- Your W-4 withholding elections
- Additional income or deductions at tax time
- Individual circumstances and tax situations
Tax rates are subject to change. Federal and state tax laws may be updated annually. This is not tax advice. For personalized help, consult a tax professional familiar with Colorado tax laws.