How retirement income is taxed
in Colorado
Colorado applies a flat 4.4% income tax rate. Here's what that means for your retirement income and how to manage it.
Colorado's retirement
tax landscape
Retirees age 55+ get a retirement income exclusion for 401(k) and IRA withdrawals: $20,000/$40,000 (single/married) for ages 55–64, increasing to $24,000/$48,000 for age 65+. Note: Colorado does exempt Social Security in reality, but the Drawdown Arc calculator does not currently model the state-level SS exemption — SS is treated as taxable at the state level in projections.
Understanding how Colorado treats each type of retirement income is essential for planning your withdrawals, conversions, and Social Security timing. The interaction between state and federal taxes determines your true after-tax income each year.
What's taxed
and what's not
Here's how Colorado treats the major types of retirement income.
Taxable in the calculator. Colorado does exempt SS in reality, but this is not yet modeled.
Exclusion of $20,000/$40,000 for ages 55–64; $24,000/$48,000 for age 65+.
Fully taxable as ordinary income in the calculator. The retirement exclusion applies to 401(k)/IRA withdrawals only.
Qualified distributions are fully exempt at both the state and federal level.
Colorado's
tax rate
Colorado has a flat income tax rate of 4.4%. All taxable income above the standard deduction is taxed at this single rate. The standard deduction is $15,750 for single filers and $31,500 for married filing jointly.
A flat rate simplifies planning — there are no brackets to manage. Every additional dollar of retirement income is taxed at 4.4% regardless of how much you withdraw. The planning focus shifts to maximizing deductions and exemptions rather than staying within bracket thresholds.
All taxable income above the standard deduction is taxed at this rate. No brackets to manage.
$15,750 single / $31,500 married filing jointly. Income below this threshold is tax-free.
Strategies to reduce your
Colorado tax burden
The retirement income exclusion is the key planning lever: $20,000/$40,000 (single/married) for ages 55–64, increasing to $24,000/$48,000 for age 65+. This applies to 401(k) and IRA withdrawals. Roth conversions before 55 avoid state tax on converted amounts. Federal tax planning — withdrawal sequencing and SS timing — drives the primary savings opportunity.
Roth conversions before retirement. Converting traditional IRA balances to Roth during lower-income years means paying Colorado tax now at lower rates, then taking tax-free Roth withdrawals later. See the full Roth conversion strategy guide.
Withdrawal sequencing. The order you draw from different accounts each year matters. Drawing from taxable brokerage accounts before tapping tax-deferred accounts can keep your Colorado ordinary income lower. Read more in which accounts to withdraw from first.
Social Security timing. Optimizing when you claim Social Security affects both your federal and state tax picture. See when to start Social Security.
Model your Colorado
retirement taxes
The interaction between Colorado's tax rules and federal taxes is too complex to estimate by hand. A year-by-year projection shows your actual tax burden for every year of retirement.
Drawdown Arc's projection engine includes Colorado's flat rate, standard deduction, and retirement income exemptions. Set your state to Colorado and enter your account balances, pension, and Social Security timing — the projection shows your Colorado state tax alongside federal tax for every year.
State tax modeling is a Pro feature. The free calculator shows your full federal tax projection — upgrade to Pro to add Colorado (or any of the 50 states) to your model.
Related guides