Does Colorado Tax Retirement Income?
Colorado lets retirees 65 and older subtract all of their federally taxable Social Security plus up to $24,000 of pension and retirement account income, but the two subtractions share a limit, so the $24,000 is often smaller than it looks.
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Quick answer
Colorado lets retirees 65 and older subtract all of their federally taxable Social Security plus up to $24,000 of pension and retirement account income, but the two subtractions share a limit, so the $24,000 is often smaller than it looks. The top state individual income-tax rate shown for 2026 is 4.40%.
Official sources: Colorado Department of Revenue, information for retirees
How Colorado Treats Each Retirement Income Stream
| Income stream | Colorado treatment |
|---|---|
| Social Security | 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. |
| Public and private pensions | 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. |
| Traditional 401(k) and IRA withdrawals | 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. |
| Military retirement pay | 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. |
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.
The State Exclusion That Changes the Math
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. A 2025 bill to remove the caps entirely (SB 25-136) died in committee, so these limits still apply for 2026.
Model the actual eligibility rule
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 2025, but the statutory 2026 rate is 4.40% and forecasts do not project a rate reduction for 2026.
A Worked Retirement-Income Example
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.
This is a state-income example, not a tax return
Federal tax, local income tax, filing status, deductions, basis, Roth treatment, residency, and plan-specific rules can change the result. Use the example to compare structure, not as individualized tax advice.
Military Retirement and Transfer-Tax Fine Print
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.
Estate and inheritance tax: Colorado has no estate or inheritance tax.
Should Retirement Taxes Drive a Move to Colorado?
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.
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 2025, but the statutory 2026 rate is 4.40% and forecasts do not project a rate reduction for 2026.
Compare the annual retirement-income result with property tax, insurance, sales tax, health-care access, housing cost, and the residency facts needed to leave the former state. For a broader comparison, use our 51-jurisdiction retirement tax table.
Colorado Retirement Tax FAQs
Planning retirement income in Colorado?
We can model the state and federal interaction before a large distribution, Roth conversion, or interstate move. The initial consultation is free. Educational content is not individualized tax advice.