Did you know that Colorado is considered one of the most tax-friendly states for individuals who are retiring? Not only is the Centennial State a beautiful location in the mounts, but it also keeps your tax burden low. When you have the right accounting firm in Denver at your side, you can enjoy your golden years in a place that seems like heaven on earth.
What Makes Colorado Unique for Retirees
Retirees who are 55 or older and paying taxes receive a large retirement income exclusion from state taxes. What’s even better is that it increases when someone turns 65. As far as property taxes go, the state has one of the lowest median rates in the United States. On top of that, many people of retirement age quality for an exemption of up to 50% for the first $200,000 of a property’s value.
The main downfall is that the sales taxes in Colorado can be higher than in other states. These have a state and local component and may reach or go over 11% in some locations. However, those who don’t plan to do much shopping after retirement have less reason to worry about the state sales tax. Ask your accounting firm in Denver whether this is right for your needs.
Income Taxes in Colorado
The income tax in Colorado is a flat rate of 4.55%. This is lower than the rate before 2020 thanks to the passage of Proposition 116, which moved the rate down from 4.63%. There is also a limit in terms of how much the state’s revenue can grow on a year-over-year basis by lowering the tax rate if revenue growth is too high. As an example, a rate reduction of 4.5% was implemented in 2019.
Depending on location, some areas, like Denver, also have a monthly payroll tax.
Taxes on Social Security Benefits
$24,000 or less of Social Security benefits or other retirement income taxed by the federal government can be excluded when it comes to Colorado income tax. This number drops to $20,000 for those who are between 55 and 64.
Taxes on Other Retirement Income
Any taxpayers who are 65 or older can exclude up to $24,000 in income from government, military, and private retirement plans. This includes IRAs as well as Social Security benefits that are taxed on a federal level. This works out to $20,000 for those who are between 55 and 64 years of age.
In addition, for 2020, those over 55 can exclude up to $75,000 in income from military retirement plans. This number will reach $10,000 in 2021 and $15,000 for 2022 and 2023. Railroad Retirement benefits are also exempt from state taxes.
Are you ready to learn more about retiring to Colorado? Venture CPAs is an accounting firm in Denver that can help you with all things related to taxes. We can offer you more insight into your options and help you keep on top of taxes if you decide to make the move!