Retiring in Colorado: What the State Actually Takes

On the ordinary retirement profile — $34,000 of Social Security and $61,000 of plan distributions — Colorado takes $2,416 a year in state income tax.

That is the number people compare, and it is the smallest of three. Property tax adds about $2,871 on the state's $563,000 median home, and insurance another $3,312. The three together come to $8,599, placing Colorado 33rd of 50.

A note before you start. This is general education, not tax advice. Every Colorado figure comes from this site's own fifty-state income-tax dataset and its retirement tax engine, computed for a single filer aged 70 unless stated otherwise; property tax, median home price and insurance figures come from the site's core state dataset. Rates are for tax year 2025. Property tax is assessed locally in most states, so the effective rate here is a statewide figure rather than your county's.

1. What Colorado takes from retirement income

On Social Security. Colorado is one of the eight states still taxing Social Security in 2026, and the answer turns entirely on age — the thresholds above apply to one age band only. Read this block as three cases. (1) age 65 and older: the entire federally taxable Social Security benefit is subtractable, with NO income threshold at all, for income tax years beginning January 1, 2022 and after. The thresholds recorded above do not apply to this group. (2) age 55 to 64: for income tax years beginning January 1, 2025 and after, the full federally taxable benefit is subtractable only if adjusted gross income does not exceed $75,000 filing individually or $95,000 filing jointly. These are the figures recorded in thresholds.

On 401(k) and IRA distributions. 401(k), 403(b) and traditional IRA distributions are covered by Colorado's general pension and annuity subtraction, which is age-tiered and shared with Social Security rather than additional to it. That death-benefit carve-out is the only route to the subtraction before 55, and it requires distribution code 4 in box 7 of the 1099-R. It is per taxpayer, not per return: Colorado states that in the case of joint filers the subtraction is allowed separately to each taxpayer included in the joint return, which is why the married-joint figure above is $48,000 — two spouses both 65 or older. A couple where one spouse is 66 and the other is 60 gets $24,000 + $20,000 = $44,000, not $48,000, so the joint figure is a maximum rather than an automatic entitlement. The shared cap is the thing most lists Miss: this is the same allowance the Social Security subtraction draws on. Social Security is claimed on its own line of the Subtractions from Income Schedule (DR 0104AD) and then reduces what remains for other pension and annuity income.

2. The rule that decides your Colorado bill

Private and public pensions are treated identically in Colorado — checked rather than assumed, and it is the opposite of the common pattern. Both flow through the same age-tiered pension and annuity subtraction ($20,000 at ages 55-64, $24,000 at 65 and older, nothing under 55 except death benefits), and Colorado has no general government-pension exemption. The one public-pension-specific item is narrow and almost always inapplicable: a separate PERA/DPSRS subtraction exists for pension income from the Colorado Public Employees Retirement Association or the Denver Public Schools Retirement System, but Colorado states plainly that most pera and DPS retirement benefits will not qualify — it is available only to retirees who made contributions to PERA or the DPS Retirement System between 1984 and 1986, and it is a recovery of already-taxed basis rather than an exemption. It is claimed only after the ordinary pension and annuity subtraction is exhausted. Military retirement is the one real divergence, and it runs the opposite way from most states — it helps the young, not the old. A retired servicemember under age 55 may subtract military retirement benefits up to $15,000 for tax years 2022 through 2028 (the phase-in ran $4,500 for 2019, $7,500 for 2020, $10,000 for 2021). This is the only meaningful retirement subtraction Colorado offers anyone under 55.

Colorado's retirement relief is one shared allowance, not a stack: Social Security, private pensions, public pensions and 401(k)/IRA distributions all draw on the same $20,000 (ages 55-64) or $24,000 (65+) subtraction, and Social Security consumes it first.

Age 55 is the cliff that matters most. Under 55 a Colorado retiree gets nothing at all unless the income is a death benefit or military retirement pay.

3. What Colorado charges at three income levels

The same state, three retirements. All figures are for a single filer aged 70.

Read down the middle column. The exemption that makes a modest retirement free here is worth nothing to an affluent one — the bill goes from $0 to $6,156 as income rises. That is a phase-out, and it is the single most misreported feature of state retirement taxation.

A married couple with $48,000 of Social Security and $62,000 of distributions pays $1,311.

4. Property tax, and why it lands harder in retirement

An effective rate of 0.5% on the state's $563,000 median home is about $2,871 a year.

For a retiree this is a harder cost than income tax, and the reason is structural: property tax is levied on the house, while retirement income falls. A bill sized to a working income arrives every year after the income has gone.

It is also assessed locally almost everywhere, so a statewide effective rate conceals real variation between counties. Treat the figure above as the state's shape rather than as your bill.

Colorado does have a homestead provision, and it is the one lever on this line worth understanding.

Colorado has two distinct 'homestead' benefits that are easy to conflate. (1) Creditor-protection homestead exemption (C.R.S. §38-41-201): protects up to $250,000 of home equity from most creditors' judgments for an owner-occupied primary residence, or $350,000 if the owner, spouse, or a dependent is elderly (60+) or disabled — automatic, not a property-tax benefit. (2) Senior/disabled-veteran property-tax exemption (Colo. Const. Art. X, §3.5): for qualifying seniors (65+, 10 consecutive years of ownership/occupancy) and 100%-disabled veterans, 50% of the first $200,000 of a home's actual value is exempt from property tax (up to $100,000 of value excluded), state-funded and requiring an application (Form 15-DPT-AR) by July 15. Unlike FL/TX, there is no broad homestead property-tax exemption available to all owner-occupants regardless of age — only the senior/veteran-targeted version described here.

Two things about homestead rules catch people out after a move. They almost always require the property to be your primary residence, which a snowbird splitting the year has to be able to demonstrate. And several states require an application to the county rather than granting it automatically — a benefit you qualify for and never claimed is worth nothing.

5. Insurance, the line nobody prices

Average home insurance in Colorado: $3,312 a year — 37th cheapest of the fifty states.

This is the line almost no retirement comparison includes, and across the country it varies more than income tax does: from Hawaii's $900 to Florida's $8,375, a ninefold spread.

For a retiree it behaves like a second property tax. It rises independently of income, a fixed-income household absorbs the whole increase, and it is a condition of the mortgage if you still have one.

6. What retiring in Colorado actually costs

Income tax on the typical retirement profile, plus property tax and insurance on each state's own median home. Colorado is shown against its own neighbours in the ranking, and against the extremes.

Colorado comes to $8,599, 33rd of 50.

Income tax is 28% of that total. It is the line every comparison leads with and, here, not the largest of the three.

One large caveat, and it matters. Each row uses that state's own median home, and those differ a great deal. So this compares the typical house in each state, not the same house in each state — buying below a state's median improves its figure materially.

7. The age that changes your Colorado bill

The same $50,000 of plan distributions costs $1,492 at 60 and $436 at 70. That is an age trigger, and it is worth $1,056 a year to wait — or, put the other way, it is what retiring early costs you in Colorado on top of everything else. 401(k), 403(b) and traditional IRA distributions are covered by Colorado's general pension and annuity subtraction, which is age-tiered and shared with Social Security rather than additional to it. That death-benefit carve-out is the only route to the subtraction before 55, and it requires distribution code 4 in box 7 of the 1099-R. It is per taxpayer, not per return: Colorado states that in the case of joint filers the subtraction is allowed separately to each taxpayer included in the joint return, which is why the married-joint figure above is $48,000 — two spouses both 65 or older. A couple where one spouse is 66 and the other is 60 gets $24,000 + $20,000 = $44,000, not $48,000, so the joint figure is a maximum rather than an automatic entitlement. The shared cap is the thing most lists Miss: this is the same allowance the Social Security subtraction draws on. Social Security is claimed on its own line of the Subtractions from Income Schedule (DR 0104AD) and then reduces what remains for other pension and annuity income. It also changes the withdrawal order. Someone retiring before the trigger age has a reason to draw on taxable or Roth money first and leave the pre-tax balance until the exclusion applies.

8. What a Roth conversion costs in Colorado

Converting $50,000 to a Roth costs an extra $2,200 in Colorado tax — 4.4 cents on the dollar.

These are computed, not read off the bracket table, which matters because a conversion large enough to be worth making usually leaves the bracket it started in.

The state's share is the part you can move. Convert in a year you are resident somewhere with no income tax and it is zero; convert here and it is 4.4%. The federal tax is due either way.

9. What part-time work costs here

$20,000 of part-time work costs an extra $880 in Colorado tax — an effective 4.4% on the earnings.

Compare that with the 4.4% a Roth conversion costs. The state treats the two identically, which keeps the decision a non-tax one.

Two federal rules apply on top and neither depends on your state. Earnings can raise the taxable share of Social Security, and claiming before full retirement age exposes you to the federal earnings test.

10. The order to draw your accounts in

The order you draw accounts in is worth real money, and the right order depends on the state.

Before the age trigger, draw from taxable and Roth money first. Colorado charges $1,492 on $50,000 of plan distributions at 60 and $436 at 70, so a dollar taken early costs more than the same dollar taken later.

After the trigger, the pre-tax balance becomes the cheap source and the order reverses.

Required minimum distributions overrule all of this from 73 onward. Once they begin you must take the calculated amount whether the order suits you or not, which is the argument for drawing down or converting the pre-tax balance in the years before.

11. Or move across the state line

For most people the real alternative to Colorado is not Wyoming — it is the state on the other side of the line, near the same family, the same doctors and the same weather.

Wyoming is the cheapest of the group at $3,983, $4,616 below Colorado. Whether that is worth a move is a question about your life rather than your spreadsheet — but it is the comparison worth running, because it is the one you could actually act on.

One thing this table cannot show is the county. Property tax is set locally, and the spread inside a single state is routinely wider than the gap between two neighbouring states. A border move to a cheaper state and an expensive county can leave you worse off.

12. If you are moving to Colorado from somewhere else

The eight most populous states people leave, measured against Colorado on the same three lines.

Colorado is cheaper than 4 of these eight. Which means the answer genuinely depends on where you are starting from.

A move is not free, and this table does not price it. Transaction costs on both houses run to several per cent of the sale price, and at typical values that is often more than the first two or three years of the saving.

Colorado charges a transfer tax on the purchase itself — 0%, customarily paid by the seller. On the state's $563,000 median home that is about $56, once, at the point of sale. Closing costs here run about 2% to 4% of the price — $11,260 to $22,520 on the median home, which is the real entry fee for the annual saving this article has been describing.

13. What Colorado does not exempt you from

The federal system, entirely. This is the commonest misunderstanding about state retirement taxation, and it is worth stating plainly.

Required minimum distributions still apply. The amount is federal — your prior-year balance divided by an IRS life expectancy factor — and identical in all fifty states. A state changes what the distribution costs you, not whether you must take it.

Social Security is still federally taxable, on the federal provisional-income calculation, whatever your state does with it.

IRMAA still applies, with its two-year lag. A large conversion or distribution raises a Medicare premium two years later regardless of address.

And capital gains are still federally taxed. What Colorado adds on top is a separate question from what the federal system takes.

14. Establishing that you actually live here

Any state tax advantage is worth nothing until Colorado is your domicile, and the state you left may disagree about when that happened.

High-tax states audit departing residents. The question is not whether you own a home here; it is whether you genuinely abandoned the old domicile. Days spent in each state, voter registration, vehicle registration, where your doctors are and where you claim a homestead all bear on it.

The snowbird case is the risky one. Splitting the year between two states while keeping a home in both is exactly the profile a residency audit is built for. If a plan depends on the saving, count the days from the first year rather than reconstructing them afterwards.

15. Who Colorado actually suits

Someone on a modest retirement income. Colorado charges $0 at the modest profile — the exemption does its work at the bottom of the range.

It suits an affluent retiree least. At the affluent profile the bill is $6,156, and whatever exclusion helps a modest income has stopped helping by then.

16. What to check before you decide

Get your county's actual property tax rate, not the state average. Property tax is levied locally almost everywhere, and the spread inside a state is often wider than the spread between states.

Get a real insurance quote on a real address. $3,312 is the state average; construction, roof age and exposure move it a long way.

Work out your own income tax rather than using the profile above. $95,000 split one way is not $95,000 split another, and in Colorado the mix between Social Security and distributions changes the answer.

And check what your current state actually charges you before assuming it is worse. On these three lines the ranking surprises people in both directions.

Frequently asked questions

Does Colorado tax Social Security? No. Colorado is one of the eight states still taxing Social Security in 2026, and the answer turns entirely on age — the thresholds above apply to one age band only. Read this block as three cases. (1) age 65 and older: the entire federally taxable Social Security benefit is subtractable, with NO income threshold at all, for income tax years beginning January 1, 2022 and after. The thresholds recorded above do not apply to this group.

Does Colorado tax 401(k) or IRA withdrawals? 401(k), 403(b) and traditional IRA distributions are covered by Colorado's general pension and annuity subtraction, which is age-tiered and shared with Social Security rather than additional to it. That death-benefit carve-out is the only route to the subtraction before 55, and it requires distribution code 4 in box 7 of the 1099-R. It is per taxpayer, not per return: Colorado states that in the case of joint filers the subtraction is allowed separately to each taxpayer included in the joint return, which is why the married-joint figure above is $48,000 — two spouses both 65 or older. A couple where one spouse is 66 and the other is 60 gets $24,000 + $20,000 = $44,000, not $48,000, so the joint figure is a maximum rather than an automatic entitlement.

What about pensions — private, government, or military? A $50,000 pension costs $436 if private, $436 if a government pension, and $436 if military retired pay.

What does retiring in Colorado actually cost? Income tax of $2,416 on the typical profile, plus about $2,871 of property tax and $3,312 of insurance on the median home — $8,599, which is 33rd of 50.

Is Colorado a cheap state to retire in? On these three lines it ranks 33rd of 50. Whether that makes it cheap for you depends far more on the house than on the tax code.

Is there an age at which the tax falls? Yes. The same $50,000 of plan distributions costs $1,492 at 60 and $436 at 70.

Does the exemption phase out? Yes. It is worth most at a modest income — $0 — and nothing by the affluent profile, where the bill is $6,156.

What does a Roth conversion cost in Colorado? An extra $2,200 in state tax on $50,000 converted, and $4,400 on $100,000. That is 4.4% of the amount converted, on top of the federal tax.

Does part-time work get taxed differently from my 401(k) withdrawals? $20,000 of part-time earnings costs $880 in state tax, an effective 4.4%.

Would a neighbouring state be cheaper than Colorado? Wyoming is the cheapest of Colorado and its neighbours at $3,983 against Colorado's $8,599.

Do required minimum distributions change if I move here? No. The required amount is a federal calculation and identical in every state. What changes is what the distribution costs once taken.

Does this article include local income tax? No local income tax applies to retirement income in Colorado on the figures used here.

Will Colorado's treatment still apply in ten years? State legislatures revise retirement taxation regularly — several states have changed theirs in the past three years. Figures here are for tax year 2026 and are worth re-checking before a move.

What to do next

Two numbers decide this and neither is the one in the headline: your county's actual property tax rate, and a real insurance quote on a real address.

• Retirement state tax calculator — what any state charges on your income, cited per state
• RMD calculator — the distribution you must take, which no state changes
• Home insurance premium estimator — the line this article says decides it
• The Relocation Tax Playbook — establishing domicile, and the states that contest it