How Colorado taxes retirement income
Colorado does not tax Social Security benefits. Pensions and 401(k)/IRA withdrawals are partly taxed (there is an exclusion, then the rest is taxed). Colorado taxes retirement income but allows a pension/annuity subtraction under C.R.S. 39-22-104(4)(f): taxpayers age 55-64 may subtract up to $20,000/year of qualifying pension, annuity, and IRA income; taxpayers 65+ may subtract up to $24,000/year. Social Security benefits included in federal taxable income get fuller relief: taxpayers 65+ can subtract the entire taxable Social Security amount (tax years 2022+); taxpayers 55-64 can also subtract the entire taxable amount if AGI is at or below $75,000 (single) / $95,000 (joint) (tax years 2025+), otherwise Social Security shares the same $20,000 cap with other pension/annuity income. Under age 55, none of this subtraction applies (other than a $20,000 death-benefit subtraction), so pension/401(k)/IRA/Social Security income is fully taxed at the flat rate. Premature (pre-59.5) 401(k)/IRA distributions never qualify for the subtraction and are fully taxable regardless of age.
Retirement income tax in Colorado, at a glance
| Income type | Taxed by Colorado? |
|---|---|
| Social Security | Yes |
| Pensions | Partially (exclusion applies) |
| 401(k) / IRA withdrawals | Yes |
| Estate / inheritance tax | None |
| Avg. property tax rate | 0.5% of home value |
Does Colorado tax Social Security benefits?
Yes, Colorado taxes some Social Security income.
Does Colorado tax pensions and 401(k) or IRA withdrawals?
Partly. Colorado taxes retirement income but allows a pension/annuity subtraction under C.R.S. 39-22-104(4)(f): taxpayers age 55-64 may subtract up to $20,000/year of qualifying pension, annuity, and IRA income; taxpayers 65+ may subtract up to $24,000/year. Social Security benefits included in federal taxable income get fuller relief: taxpayers 65+ can subtract the entire taxable Social Security amount (tax years 2022+); taxpayers 55-64 can also subtract the entire taxable amount if AGI is at or below $75,000 (single) / $95,000 (joint) (tax years 2025+), otherwise Social Security shares the same $20,000 cap with other pension/annuity income. Under age 55, none of this subtraction applies (other than a $20,000 death-benefit subtraction), so pension/401(k)/IRA/Social Security income is fully taxed at the flat rate. Premature (pre-59.5) 401(k)/IRA distributions never qualify for the subtraction and are fully taxable regardless of age.
For the mechanics of required withdrawals in retirement, see what is an RMD.
Sources
- Colorado taxation of retirement income (Social Security, pensions, 401(k)/IRA): Colorado Department of Revenue / Taxation.