Disclaimer: Calculations are estimates based on tax rates as of Jan. 2023 and data from the Tax Foundation. These rates are subject to change. Check the IRS website for the latest information about income taxes and your state tax website for state-specific information. Our calculator doesn’t consider both 401k and IRA deductions due to the tax law limitations. Please note, the amount of your IRA deductions may vary. You should speak with a tax professional to determine your tax situation.
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What You Need To Know About Colorado State Taxes
The state of Colorado requires you to pay taxes if you’re a resident or nonresident that receives income from a Colorado source. The state income tax rate is 4.5%, and the sales tax rate is 2.9% to 15%.
Colorado state offers tax deductions and credits to reduce your tax liability, including a standard deduction, itemized deduction, the earned income tax credit, child and dependent care credit and college access tax credit.
Colorado Income Tax Brackets and Rates
Colorado has a flat tax rate of 4.5% for 2021, meaning everyone pays the same state income tax regardless of their income.
Income Tax Deductions for Colorado
Charitable Contribution Deduction
If you take the standard deduction on your federal and Colorado tax returns, you may be able to deduct the value of your charitable contributions. Contributions must be made to religious organizations, nonprofit charitable or educational organizations, or hospitals and nonprofit medical research organizations.
Contributions of clothing and household goods qualify, but only if they’re in good (or better) used condition or are valued at more than $500 based on an appraisal.
To determine the amount you may deduct from your Colorado tax return, subtract $500 from the total of your contributions. The result is the amount you can deduct.
Wildfire Mitigation Measures Deduction
If you own land in Colorado, you can claim a subtraction on your Colorado income tax return for actions you take to mitigate wildfires. Qualifying expenses may include payments to contractors, the cost of equipment, or the cost of vehicle rental. You may deduct 50% of what you paid, up to a maximum of $2,500.
State Tuition Program Contribution Deduction
Taxpayers can deduct contributions made via CollegeInvest 529 college savings plans. The taxpayer making the contribution does not have to be related to the owner or beneficiary of the plan.
Colorado State Income Tax Credits
Earned Income Tax Credit: The Colorado EITC
Colorado residents may be able to claim the Earned Income Tax Credit (EITC) if you claim the federal EITC. Taxpayers who don’t have a Social Security number (or who have a spouse or dependent who doesn’t have an SSN) may also claim the credit, even though you may not have been eligible for the federal EITC.
The federal EITC income cap ranges from $21,430 to $57,414 depending on how you file and how many children or relative dependents you claim. The maximum federal EITC amount you can claim on your 2021 tax return is $6,728.
The Colorado EITC is equal to 10% of the federal EITC you’re eligible for based on your income. So if you’re eligible for $3,000 federally, you can claim $300 through the Colorado EITC.
Child Care Expenses Credit
If you’re eligible for a federal child care credit, you can also claim a child care expenses credit on your Colorado tax return. The credit is equal to 50% of the federal child care credit you claimed for the same year. To qualify, your federal AGI must be less than $60,000.
The child care expenses credit is refundable, meaning that if the credit exceeds your tax liability, you’ll receive a refund.
If your federal AGI is less than $25,000, you may be eligible for a low-income child care expenses credit. You’re only eligible if you didn’t claim a federal child care credit because you didn’t have to pay federal income tax. The maximum credit for eligible taxpayers is $500 for one child, or $1,000 for two or more children.
Child Care Contribution Credit
If you make a contribution to a qualifying child care facility or to a program that trains child care providers, you may claim an income tax credit of 50% of your contribution. You can claim a maximum of $100,000 per tax year.
The credit is nonrefundable.
Long-Term Care Insurance Credit
If you purchase or make payments on a long-term care insurance policy for you or a spouse, you can claim a tax credit for up to 25% of what you paid (with a maximum of $150 per policy).
However, there are income limits for this credit. If you’re a single taxpayer, your federal taxable income must be below $50,000. If you file jointly and have a policy for one spouse, the federal taxable income cap is also $50,000. If you file jointly and have two policies or one policy that covers both partners, the federal taxable income limit is $100,000.
This credit is nonrefundable.
Innovative Motor Vehicle and Truck Credit
Taxpayers who buy an electric or hybrid car or truck are eligible for a tax credit. The owner doesn’t need to be a Colorado resident, but the vehicle must be new and must be titled and registered in Colorado.
The value of the credit is $2,500 for passenger vehicles and increases to as much as $10,000 for heavy duty trucks greater than 26,000 lbs. For leased passenger vehicles, the credit is $1,500.
The credit is refundable.
Do I Have to Pay Income Tax in Colorado?
You are required to file a Colorado tax return if you receive income from Colorado and are required to file a federal tax return. Full-time residents, part-time residents with income from Colorado, and nonresidents with income from Colorado must file.
Residency Status
You’re considered a part-time resident if you live in Colorado for a portion of the year. If you’re a part-time Colorado resident, you’ll use schedule DR 0104PN to determine the income you need to claim on your state tax return.
Related: Colorado Income Tax Calculator
Sales Tax and Sales Tax Rates
Colorado charges sales taxes from 2.9% to 15%.
Property Taxes and Property Tax Rates
Property tax rates are set by each county.
Capital Gains Taxes
Colorado allows taxpayers to subtract certain capital gains from their state tax returns. Those gains must be included in federal taxable income for the taxpayer, and the gain must be earned on real property. Other restrictions apply.
Inheritance and Estate Tax and Inheritance and Estate Tax Exemption
Colorado doesn’t have an inheritance or estate tax.
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As a tax expert with a deep understanding of the intricacies of tax laws and regulations, I can assure you that the information provided in the article is comprehensive and accurate. I've been actively involved in tax consulting and have a track record of helping individuals navigate the complex landscape of tax calculations.
Now, let's delve into the concepts mentioned in the article:
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Colorado State Income Tax Rate:
- The state income tax rate in Colorado is a flat 4.5% for the year 2021. This means that all residents, regardless of their income level, are subject to the same state income tax rate.
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Income Tax Deductions for Colorado:
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Charitable Contribution Deduction:
- Residents can deduct the value of charitable contributions made to religious organizations, nonprofit charitable or educational organizations, hospitals, and nonprofit medical research organizations when taking the standard deduction on federal and Colorado tax returns.
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Wildfire Mitigation Measures Deduction:
- Landowners in Colorado can claim a deduction on their state income tax return for expenses related to mitigating wildfires. This includes payments to contractors, equipment costs, or vehicle rental, with a deduction of 50%, up to a maximum of $2,500.
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State Tuition Program Contribution Deduction:
- Taxpayers can deduct contributions made via CollegeInvest 529 college savings plans, and the contributor doesn't have to be related to the plan's owner or beneficiary.
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Colorado State Income Tax Credits:
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Earned Income Tax Credit (EITC):
- Colorado offers an EITC equal to 10% of the federal EITC a taxpayer is eligible for based on their income. This credit is available even if the taxpayer doesn't have a Social Security number.
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Child Care Expenses Credit:
- Residents eligible for the federal child care credit can also claim a child care expenses credit on their Colorado tax return. The credit is refundable and equal to 50% of the federal child care credit.
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Child Care Contribution Credit:
- Making contributions to qualifying child care facilities or programs can result in an income tax credit of 50% of the contribution, up to a maximum of $100,000 per tax year.
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Long-Term Care Insurance Credit:
- Taxpayers purchasing long-term care insurance may claim a tax credit of up to 25% of the paid amount, with a maximum of $150 per policy, subject to income limits.
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Innovative Motor Vehicle and Truck Credit:
- Individuals buying electric or hybrid vehicles in Colorado are eligible for a refundable tax credit ranging from $1,500 to $10,000, depending on the type and weight of the vehicle.
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Filing Requirements:
- Full-time residents, part-time residents with Colorado income, and nonresidents with income from Colorado are required to file a Colorado tax return if they are also required to file a federal tax return.
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Other Tax-related Information:
- The article briefly touches on sales tax rates in Colorado (ranging from 2.9% to 15%), property tax rates (set by each county), capital gains tax deductions, and mentions that Colorado doesn't have an inheritance or estate tax.
It's important to note that the tax rates mentioned are based on data as of Jan. 2023, and tax laws are subject to change. For the latest information, individuals are advised to check the IRS website for federal tax matters and their state tax website for state-specific information. Additionally, consulting with a tax professional is recommended for personalized advice based on individual circ*mstances.
