Colorado lets people 65 and older subtract their federally taxed Social Security in full, and it caps the subtraction for pension, annuity, IRA, and 401(k) income at $24,000. The two do not stack: any subtraction claimed for Social Security reduces the subtraction available for other pension and annuity income.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities The Colorado retirement income tax then applies a flat 4.4% rate to whatever is left.
This guide explains the pension subtraction, the Social Security rules, and how the flat rate ties it all together.
Colorado Retirement Income Tax at a Glance
Here is how Colorado treats each common source of retirement money.
| Income source | How Colorado treats it |
|---|---|
| Social Security | Fully subtracted at 65 and older. From tax year 2025, also fully subtracted at 55 to 64 if adjusted gross income is $75,000 or less filing individually, or $95,000 or less filing jointly. Claiming it reduces the subtraction available for other pension and annuity income. |
| Pensions and annuities | Subtraction up to $24,000 (65+) or $20,000 (55 to 64), less any Social Security subtraction claimed. |
| IRA and 401(k) withdrawals | Eligible for the same pension and annuity subtraction. |
| Senior exclusion | The age-based break is the pension and annuity subtraction above, tiered at 65 and at 55. |
Colorado's approach is built around one broad subtraction that covers most kinds of retirement income, Social Security included. Taxpayers 65 and older may subtract their federally taxed Social Security in full, but claiming that subtraction reduces what is available for other pension and annuity income rather than sitting beside it.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities
The flat rate is the other half of the picture. Whatever income is not subtracted is taxed at a single percentage, 4.4%, with no climbing brackets.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities
Colorado Retirement Income Tax: How It Works
Colorado has a flat income tax. The statutory rate is 4.4%, and that is the rate for tax year 2025. The 4.25% rate was a temporary reduction under the TABOR refund mechanism that applied only to tax year 2024.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities Every dollar of taxable income is taxed at that single rate, so a large withdrawal is taxed at the same percentage as a small one.
The centerpiece for retirees is the pension and annuity subtraction. If you are 65 or older at the end of the tax year, you can subtract up to $24,000 of pension, annuity, IRA, and 401(k) income.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities If you are 55 to 64, you can subtract up to $20,000. The subtraction shields that income from the flat rate entirely.
That subtraction is broad. It is not limited to traditional pensions; it covers annuity, IRA, and 401(k) distributions too.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities So a 67-year-old pulling from an IRA to cover care draws on the same subtraction as a retiree cashing a pension check, under the same limit.
How the Social Security Subtraction Fits In
Colorado treats Social Security generously. Taxpayers 65 and older may subtract the entire amount of their federally taxed Social Security benefits.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities Whatever the IRS taxed federally, Colorado subtracts back out for those 65 and up.
The part that trips people up is what that subtraction costs you elsewhere. It is not an extra allowance sitting beside the pension cap. Any subtraction claimed for Social Security reduces the subtraction you can claim for any other pension and annuity income.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities Social Security and your pension draw on the same allowance, not two separate ones.
That relief now reaches younger retirees. For income tax years beginning on or after January 1, 2025, taxpayers ages 55 to 64 may also subtract the entire amount of Social Security included in their federal taxable income, as long as adjusted gross income is $75,000 or less filing individually, or $95,000 or less filing jointly.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities The change was enacted by House Bill 24-1142, signed on June 6, 2024. For taxpayers 55 to 64 whose adjusted gross income is above those thresholds, the cap remains at $20,000.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities
Put together, a Coloradan 65 or older can subtract the full amount of their federally taxed Social Security, and whatever room that leaves in the $24,000 subtraction covers other retirement income.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities The flat rate applies to whatever is not subtracted.
What This Means for Paying for Care
If you are drawing on retirement savings to pay for senior care, Colorado's rules work in your favor, up to a point.
A withdrawal that fits inside your pension and annuity subtraction is shielded from Colorado tax entirely.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities If you are 65 or older, the subtraction runs up to $24,000 of pension, IRA, and 401(k) income a year, reduced by any subtraction you claim for Social Security.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities That is still real relief when care costs force larger withdrawals, but it is less room than the headline number suggests for anyone drawing Social Security.
The cap is where this stops working for you. Retirement income the subtraction does not cover is taxed at the flat rate.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities A big one-time withdrawal to cover a year of care can blow past the subtraction, leaving the excess taxable. Spreading withdrawals across years keeps more of each year's draw inside the cap.
There is also a federal layer the Colorado subtraction does not touch. A large withdrawal still raises your federal taxable income, which can lift your federal tax and your Medicare premiums two years out. So even when Colorado shields a withdrawal, the federal side may not. That is one more reason to keep annual draws steady rather than lumpy, and to plan the withdrawal schedule before care costs force your hand.
For the federal mechanics of these withdrawals, including the early-withdrawal penalty and required distributions, see our guide to using retirement accounts for care. To sequence your income sources so each year's withdrawal stays within the subtraction, see building a senior care funding plan. If you are just starting to map the money, begin with how to pay for senior care.
A tax professional can confirm how much of your withdrawal the subtraction will cover. The Colorado Department of Revenue publishes the rules for the pension, annuity, and Social Security subtractions.
What Colorado's Rules Add Up To
Colorado's treatment of retirement income comes down to three pieces: a full Social Security subtraction for those 65 and older, a pension and annuity subtraction capped at $24,000, and a flat 4.4% rate.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities
The design fits the typical retiree's income mix, but the pieces share one allowance rather than stacking. Social Security comes out in full for those 65 and older; what that leaves of the $24,000 subtraction covers other retirement income; and anything past that is taxed at the flat 4.4% rate rather than at a climbing bracket.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities The expansion of the Social Security subtraction to the 55-to-64 band extends that same full relief to early retirees within the $75,000 and $95,000 income limits, and leaves a $20,000 cap for those above them.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities
The limit is the subtraction cap. A retiree drawing well above what the subtraction covers will pay the flat rate on the excess.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities For high-withdrawal retirees, more of each year's income falls outside the subtractions and is taxed at 4.4%.
For most retirees living on Social Security and moderate withdrawals, the subtraction covers a good share of the income, just not as much as the headline cap implies once Social Security is in the picture. Work out how much of the allowance your Social Security subtraction uses before you plan a year's withdrawals.
Frequently Asked Questions
Does Colorado tax Social Security benefits?
For those 65 and older, no in practice. Colorado lets taxpayers 65 and older subtract the full amount of their federally taxed Social Security. For tax years beginning in 2025, the full subtraction also reaches those 55 to 64 whose adjusted gross income is $75,000 or less filing individually, or $95,000 or less filing jointly.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities Claiming it, though, reduces the subtraction available for other pension and annuity income.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities
Does the Social Security subtraction stack with the pension subtraction in Colorado?
No. Any subtraction claimed for Social Security benefits reduces the subtraction a Colorado taxpayer can claim for any other pension and annuity income.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities The Colorado Department of Revenue does not publish how that reduction is calculated on its Income Tax Topics page; it points filers to the DR 0104 income tax filing booklet, so use the subtractions schedule with your return rather than estimating from the cap.
How much retirement income can I subtract in Colorado?
Up to $24,000 if you are 65 or older, or up to $20,000 if you are 55 to 64.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities The subtraction covers pension, annuity, IRA, and 401(k) income, and Social Security too, so any Social Security subtraction you claim reduces what is left of the cap for everything else.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities
What is Colorado's income tax rate?
A flat 4.4%, which is both the statutory rate and the rate for tax year 2025. The 4.25% figure was a temporary TABOR reduction that applied only to tax year 2024.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities Taxable retirement income above your subtraction is taxed at that single rate.
Are IRA and 401(k) withdrawals taxed in Colorado?
They are eligible for the pension and annuity subtraction.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities If you are 65 or older, the subtraction runs up to $24,000, reduced by any subtraction you claim for Social Security; anything the subtraction does not cover is taxed at the flat rate.tax.colorado.gov. (n.d.). Income Tax Topics: Social Security, Pensions and Annuities. Retrieved Jun 24, 2026, from https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities
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The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.