Does Colorado Tax Retirement Income?

Partly. Colorado taxes some Social Security benefits, subject to an exclusion or age rule.

Filers age 65 and older can subtract the entire amount of Social Security included in federal taxable income, with no dollar cap. Filers 55 to 64 can do the same only if AGI is $75,000 or less (single) or $95,000 or less (joint); otherwise they are limited by the $20,000 cap.

The Colorado answer is separate from the federal one. Depending on combined income, up to 85% of Social Security benefits can be taxable on the federal return regardless of what Colorado does, so the state rule changes the state line only. Our guide to states that do not tax Social Security shows where Colorado sits among the states that still tax benefits.

Partly. Colorado taxes some pension income, subject to an exclusion or age rule.

Private and public pension income is generally taxable but qualifies for the retirement subtraction: up to $24,000 at 65 and older, up to $20,000 at 55 to 64. For filers 65 and older, the pension cap is reduced by the Social Security amount already subtracted.

The retirement subtraction is $24,000 at 65+, $20,000 at 55 to 64, and up to $20,000 for younger beneficiaries receiving survivor benefits. Because Social Security subtracted first counts against the cap for those 65 and older, a retiree with more than $24,000 of taxable Social Security gets no additional room for pension or account income. Bills to remove the caps entirely died in committee in both 2025 (SB25-136) and 2026 (HB26-1062), so these limits still apply for 2026.

Public and private pensions, annuities, and retirement-plan distributions do not always get the same treatment. The pension comparison lists which states exempt pensions broadly, partly, or only for certain plans.

Partly. Colorado taxes some traditional 401(k) and IRA withdrawals, subject to an exclusion or age rule.

Traditional 401(k) and IRA withdrawals count as pension and annuity income for the subtraction, so they can be sheltered up to whatever cap remains after Social Security.

Two timing points matter in Colorado. A Roth conversion is taxable in the year it is done, and Colorado starts from federal adjusted gross income, so a large conversion can land in a year when the state exclusion does not cover it. Qualified Roth withdrawals later are generally not taxable at either level. Required minimum distributions follow the same Colorado rules as any other traditional-account withdrawal.

Every state page on this site runs the same retiree profile so the states can be compared: $30,000 of Social Security, $40,000 withdrawn from a traditional 401(k), and a $20,000 private pension, $90,000 in total.

A 68-year-old with $30,000 of Social Security, $40,000 from a 401(k), and a $20,000 private pension has roughly $25,000 of federally taxable Social Security, all of which Colorado subtracts. But that amount exceeds the $24,000 cap, so no subtraction is left for the $60,000 of 401(k) and pension income, which is generally taxed at 4.4%, about $2,640 before other adjustments.

Colorado begins with federal taxable income, so the federal standard deduction and the age-65 addition (together roughly $18,000 for a single filer in 2026) come off first, taking the $85,500 of AGI to about $67,500. The retiree is 68, so all $25,500 of federally taxable Social Security is subtracted with no cap. That $25,500 already exceeds the $24,000 age-65 limit, which means nothing is left for the $60,000 of 401(k) and pension income. Roughly $42,000 is taxed at 4.4%, about $1,850. Contrast: the same retiree at age 62 has AGI above the $75,000 single limit, so the Social Security and pension subtraction is capped at a combined $20,000, taxable income is roughly $47,500, and the tax is about $2,090. A $150,000 lump-sum IRA withdrawal at any age adds a flat $6,600 (4.4% of $150,000) because the cap is already used up.

The same $90,000 profile looks different a state line away. The rows below come from the reviewed 51-state table; each state name links to its own guide.

• Arizona: treats Social Security as exempt, pensions as partially taxed, and 401(k) and IRA withdrawals as taxed, with a top rate of 2.50% and up to $2,500 for qualifying government pensions.
• Nevada: has no individual income tax at all.
• Texas: has no individual income tax at all.

Colorado markets itself on the flat 4.4% rate and the uncapped Social Security break at 65. The catch is the shared limit: for many retirees the $24,000 pension subtraction is fully consumed by Social Security, so 401(k) withdrawals are taxed from the first dollar.

Military retirement: Military retirees 55 and older use the regular retirement subtraction. Retirees under 55 can subtract up to $15,000 of military retirement pay for tax years 2022 through 2028. See the military retirement tax map for every state's treatment.

Estate and inheritance tax: Colorado has no estate or inheritance tax.

Selling a home or investments in Colorado: retirement-income rules do not cover capital gains. See Colorado capital gains tax before selling appreciated property or a brokerage position in the year you move or retire.

• Confirm the exclusion you are claiming. The retirement subtraction is $24,000 at 65+, $20,000 at 55 to 64, and up to $20,000 for younger beneficiaries receiving survivor benefits. Because Social Security subtracted first counts against the cap for those 65 and older, a retiree with more than $24,000 of taxable Social Security gets no additional room for pension or account income. Bills to remove the caps entirely died in committee in both 2025 (SB25-136) and 2026 (HB26-1062), so these limits still apply for 2026.
• Part-year residents. If you moved into or out of Colorado during the year, retirement income is generally allocated to the period of residency, and the former state may still tax distributions received before the move. Document the move date, the new domicile, and where each distribution was received.
• Withholding and estimates. Pension and IRA custodians often withhold federal tax but not Colorado tax. If Colorado taxes any part of your retirement income, check whether quarterly estimated payments are needed to avoid an underpayment penalty.
• Federal side. The federal return has its own rules: up to 85% of Social Security can be taxable, the temporary $6,000 federal senior deduction is available for 2025 through 2028 subject to income limits, and Roth conversions are taxed in the conversion year. State exemptions do not change any of that.
• Large one-time distributions. Do not model the Social Security subtraction and the $24,000 pension subtraction as additive at 65 and older. Also note TABOR can temporarily lower the rate in surplus years, as it did for 2024 when the rate was 4.25%, but the statutory 2026 rate is 4.40% and the June 2026 state forecast does not project a rate reduction for 2026 or 2027.

Comparing states before a move? Use the retirement taxes by state table and the moving states tax guide, and read retirement tax planning for how distributions, conversions, and a move are sequenced together.