Colorado state income tax: engine rules, 2026

How the tax is computed

Every step the engine takes for Colorado, in the order it takes them. Steps marked with a filing status or household type apply only there. Each step links the section below that carries Colorado's figures and the official sources for it; the calculation order page describes every step for all jurisdictions.

What each filing status gets, read back from the engine for a household with $1 of income (so below every phase-out and income test):

1. Per-person mode joint returns with the spouse's age given On a joint return with the spouse's age given, every age test the state applies per taxpayer is evaluated for each spouse at their own age. Without it one household age applies to both.
   engine step (compute_state_tax_detail). Engine convention, no external source: The engine cannot know the second spouse's age unless told.
2. Rate schedule and standard deduction by filing status Single uses the single schedule and deduction; married filing jointly the joint ones. Head of household and married filing separately follow the two steps below.
   Colorado's values · engine step (select_brackets). Sources (Rate schedule): DR 1098 2026 Colorado Withholding Worksheet for Employers (checked 2026-09-27); Book 104 2025 Colorado Individual Income Tax Filing Guide (checked 2026-09-27)
3. Married filing separately Where the state publishes its own separate schedule, that one (with half the joint deduction unless a separate deduction is set). Where one schedule applies to every status, that schedule unscaled with the single deduction. Otherwise the joint schedule with every threshold and the deduction halved (computed as the joint tax on twice the income, halved).
   Colorado's values · engine step (select_brackets). Sources (Rate schedule): DR 1098 2026 Colorado Withholding Worksheet for Employers (checked 2026-09-27); Book 104 2025 Colorado Individual Income Tax Filing Guide (checked 2026-09-27)
4. Head of household The state's head-of-household schedule where it has one, else the single schedule; the head-of-household deduction where set, else the single deduction.
   Colorado's values · engine step (select_brackets). Sources (Rate schedule): DR 1098 2026 Colorado Withholding Worksheet for Employers (checked 2026-09-27); Book 104 2025 Colorado Individual Income Tax Filing Guide (checked 2026-09-27)
5. The income total every income test uses Other ordinary income + retirement distributions (before any exclusion) + conversion + federally taxable Social Security + long-term gains. It stands in for federal adjusted gross income in every threshold, cliff and phase-out below; state subtractions do not reduce it.
   engine step (compute_state_tax_detail). Engine convention, no external source: The inputs are the federal AGI components, so their sum is federal AGI for these income types.
6. Attributing income to each spouse joint returns with each spouse's own amounts given With a caller's split (the API's spouse object), each spouse's own distributions, pension, public pension, conversion, wages and military pay; spouse 2's shares are clamped into the household totals and spouse 1 gets the rest. Without a split, in per-person mode, every item is divided 50/50. Social Security, other ordinary income and gains are always divided 50/50 where a rule needs a per-person amount. The split is used only where a state's rule is per taxpayer; household totals stay authoritative for the base and the income tests.
   engine step (compute_state_tax_detail). Engine convention, no external source: Equal attribution is the neutral split when the owner of a dollar is not known.
7. Keeping the per-spouse shares inside the household joint returns with each spouse's own amounts given After the public-pension and employer-pension carve-outs, if the two spouses' remaining shares add up to more than the household's exclusion-eligible distributions (an inconsistent split), spouse 1's share is reduced so they do not.
   engine step (compute_state_tax_detail). Engine convention, no external source: Input normalisation.
8. Military retirement pay The state's military rule runs first, on military pay alone, per taxpayer: each spouse's own pay at their own age when attributed, otherwise half each at the household age on a joint return. Exempt dollars leave the base; the rest become pension dollars for the general retirement rules.
   Colorado's values · engine step (compute_state_tax_detail). Sources (Military retirement pay): Retired servicemembers (checked 2026-09-27); HB26 1062 (checked 2026-09-27)
9. One taxpayer's military exemption Exempt: all of it (below the age split, up to the younger cap). Capped: up to the cap for the age tier, plus the earned-income bonus below the age split when the taxpayer's own wages exceed the threshold, less the taxpayer's own Social Security where the rule says so. Percentage: the percentage (below the age split, up to the younger cap). Then the income limit: above it the exemption is lost, or phased out over the range where one is set.
   Colorado's values · engine step (military_exempt_one). Sources (Military retirement pay): Retired servicemembers (checked 2026-09-27); HB26 1062 (checked 2026-09-27)
10. Colorado: per spouse, own ages joint returns with the spouse's age given Per spouse at their own ages (both ages known): each spouse's own distributions and half the Social Security through the subtraction below, at that spouse's age; the income test for ages 55 to 64 uses the joint income total. A conversion is taxed in full.
    Colorado's values · engine step (compute_state_tax_detail). Sources (IRA, 401(k) and private pensions): Income Tax Topics: Social Security, Pensions, and Annuities (Revised January 2025) (checked 2026-09-27); Individual Income Tax | Information for Retirees (checked 2026-09-27)
11. Colorado: per spouse, household age joint returns Joint return without the spouse's age: still per spouse, each at the household age, with the distributions split by the caller's split or 50/50 and Social Security 50/50. A conversion is taxed in full.
    Colorado's values · engine step (compute_state_tax_detail). Sources (IRA, 401(k) and private pensions): Income Tax Topics: Social Security, Pensions, and Annuities (Revised January 2025) (checked 2026-09-27); Individual Income Tax | Information for Retirees (checked 2026-09-27)
12. Colorado: one filer Otherwise (single, separate and head-of-household returns): one subtraction on the whole amount. A conversion is taxed in full.
    Colorado's values · engine step (compute_state_tax_detail). Sources (IRA, 401(k) and private pensions): Income Tax Topics: Social Security, Pensions, and Annuities (Revised January 2025) (checked 2026-09-27); Individual Income Tax | Information for Retirees (checked 2026-09-27)
13. Colorado Social Security and pension subtraction 65 or older: Social Security fully subtracted; pension and annuity income up to $24,000 less the Social Security subtracted. 55 to 64 with income at or below the threshold: the same with a $20,000 cap. 55 to 64 above it: one shared $20,000, Social Security first. Under 55: no subtraction.
    Colorado's values · engine step (co_retirement_in_state_base). Sources (IRA, 401(k) and private pensions): Income Tax Topics: Social Security, Pensions, and Annuities (Revised January 2025) (checked 2026-09-27); Individual Income Tax | Information for Retirees (checked 2026-09-27)
14. Which Social Security threshold applies Joint returns use the joint threshold; head of household uses it too where the state says so, otherwise the single one; married filing separately uses its own threshold where set, else the single one. Benefits are tested against the income total above.
    Colorado's values · engine step (ss_amount_in_state_base). Sources (Social Security): Income Tax Topics: Social Security, Pensions, and Annuities (Revised January 2025) (checked 2026-09-27); HB24-1142 Social Security Income Tax Subtraction (checked 2026-09-27); SB25-136 (2025 Regular Session) bill page (checked 2026-09-27)
15. Social Security: Colorado age bands (Social Security alone) The same age bands as the Colorado subtraction, on Social Security alone. In a calculation Colorado always takes the joint subtraction above; this branch serves callers of the Social Security rule by itself.
    Colorado's values · engine step (ss_amount_in_state_base). Sources (Social Security): Income Tax Topics: Social Security, Pensions, and Annuities (Revised January 2025) (checked 2026-09-27); HB24-1142 Social Security Income Tax Subtraction (checked 2026-09-27); SB25-136 (2025 Regular Session) bill page (checked 2026-09-27)
16. Long-term gains in the base Where gains are taxed as ordinary income: net long-term gain less the flat exclusion (never below zero), times the inclusion share. Elsewhere none enters.
    Colorado's values · engine step (compute_state_tax_detail). Sources (Capital gains): Book 104 2025 Colorado Individual Income Tax Filing Guide (checked 2026-09-27)
17. State taxable income Other ordinary income + Social Security, retirement income, conversion and gains left in the base − standard deduction − personal exemption − age subtractions.
    engine step (compute_state_tax_detail). Engine convention, no external source: The order of subtraction follows the state forms; each amount is sourced at its own step.
18. Starting from federal taxable income only when the caller supplies federal taxable income (the planner; not the API) When the caller supplies federal taxable income (the planner does; the API does not), the base starts from it, adds the gains in it (less the state's gain subtraction), and subtracts the state's own exclusions and subtractions; the state's deduction is not subtracted again.
    Colorado's values · engine step (compute_state_tax_detail). Sources (Interaction with the federal return): Book 104 2025 Colorado Individual Income Tax Filing Guide (checked 2026-09-27)
19. No tax at or below zero State taxable income at or below zero returns a tax of 0 (credits are not refundable and nothing below applies).
    engine step (compute_state_tax_detail). Engine convention, no external source: Every credit the engine carries is nonrefundable, so nothing below can make a zero tax negative; each credit is sourced at its own step.
20. Separate-return scaling married filing separately For the halved-joint rule, taxable income is doubled before the schedule and the result halved.
    Colorado's values · engine step (compute_state_tax_detail). Sources (Rate schedule): DR 1098 2026 Colorado Withholding Worksheet for Employers (checked 2026-09-27); Book 104 2025 Colorado Individual Income Tax Filing Guide (checked 2026-09-27)
21. The rate schedule Each bracket's rate on the part of taxable income inside it, summed. No rounding: the result is carried in full precision.
    Colorado's values · engine step (apply_state_brackets). Sources (Rate schedule): DR 1098 2026 Colorado Withholding Worksheet for Employers (checked 2026-09-27); Book 104 2025 Colorado Individual Income Tax Filing Guide (checked 2026-09-27)
22. Credits cannot make the tax negative The credits are subtracted and the result floored at zero.
    engine step (compute_state_tax_detail). Engine convention, no external source: Every credit the engine carries is nonrefundable; each credit is sourced at its own step.

Worked examples

Computed by the engine for the fixed households below (the same ones for every state, so states compare directly). Federal tax is not supplied, so a federal-tax deduction is not taken; the income tests use the sum of the components as income.

Line by line

The intermediate lines the engine records while it computes each example (its detail record, printed as it comes out; lines that are zero are left out). The engine's documentation build checks that the lines add up to the taxable income and the tax, for every state, filing status and a grid of households. Each line links the engine step that produces it.

What the engine does not calculate, and known approximations

• A Roth conversion does not draw the pension and annuity subtraction (the conservative reading of an unsettled question).
• Below age 55 the death-benefit exception is not modeled; no subtraction applies.
• The PERA/DPSRS contribution-basis subtraction is not modeled. (Public pensions)

What the engine does not calculate for any state (itemized deductions, credits beyond those listed, part-year residents, dependents, blindness and disability, and more) is listed on the calculation order page.

Verification

Worksheet-tested Golden and unit tests follow form DR 0104 line 1 (federal taxable income) and DR 0104AD line 4 (the pension and Social Security subtraction).

• Golden scenarios (hand-computed expected tax, asserted to within $1): M13, GCO3, COSEN1, COCONV1.
• State-specific unit tests: test_co_ss_hb24_1142_age_and_agi, test_co_shared_20k_cap_ss_and_pension, test_v3_folds_v2, test_co_under55_no_subtraction, test_d12_conformity_states, test_co_conversion_not_pooled, test_legacy_request_equals_v2, test_equal_ages_reproduce_household, test_military_tiers, test_co_per_spouse, test_co_per_spouse_household.
• Structural tests covering every state: 3.
• State forms and worksheets followed in the test derivations: DR 0104 line 1; DR 0104AD line 4.