Colorado Capital Gains Tax Calculator

Colorado's Taxpayer's Bill of Rights (TABOR), a constitutional amendment passed by voters in 1992, caps how much revenue the state can retain. When actual collections exceed that cap, the surplus gets returned to taxpayers — and unlike many states' surplus-refund mechanisms (which just cut a check), Colorado has sometimes implemented this as a temporary reduction to the flat income tax rate itself. In 2024, the rate dipped to 4.25% under this mechanism before returning to the standard 4.4% for 2025. For a capital gain specifically, this matters directly: if a TABOR reduction is active in the year you sell, your gain is taxed at whatever the reduced rate is that year — not the standard 4.4% — with zero additional planning required on your part.

The catch is that these reductions are neither predictable nor guaranteed years in advance — they depend on actual state revenue performance. Before finalizing a large sale, it's worth a quick check with the Colorado Department of Revenue for whether a TABOR adjustment is active for the current tax year.

Tax year	Rate
2022 (base rate after Prop 121)	4.4%
2024 (TABOR reduction)	4.25%
2025	4.4%
2026 (absent a new TABOR adjustment)	4.4%

A narrow subtraction most people shouldn't assume applies

Colorado does have something called the "capital gain subtraction" in its tax code, but it's been significantly narrowed for tax years 2022 and later, and most investors selling stock, a typical rental property, or a business interest today won't qualify for it. If you're considering whether it might apply to your specific situation — it has historically involved things like Colorado-based tangible or real property held for extended periods — confirm directly with a Colorado CPA rather than assuming it reduces your bill.

No local tax, straightforward step-up on inheritance

• No Colorado city or county levies its own income tax — Denver's "Occupational Privilege Tax" is a small flat per-employee charge, not an income-based tax, and doesn't affect capital gains.
• Colorado has no state estate or inheritance tax, so inherited assets get the full federal step-up in basis with no additional state-level complication.
• Retirement income gets a real exclusion — up to $20,000/year (ages 55-64) or $24,000/year (65+) for pension, Social Security, and IRA/401(k) income — though this doesn't extend to investment or property capital gains specifically.

Colorado's flat 4.4% rate, the TABOR rate-reduction mechanism, and the narrowed capital gain subtraction verified against multiple independent 2026 Colorado tax guides and the Colorado Department of Revenue. This is a planning estimate — confirm the current-year rate (including any active TABOR adjustment) with the Colorado Department of Revenue before a major sale.