Colorado taxes capital gains at 4.4%. Combined with federal taxes, your effective rate on a home sale could reach 23.2%.
CO State Rate
4.4%
Flat tax rate
Federal Rate
15%
Most common long-term bracket
Combined Effective
23.2%
On $150K taxable gain (example)
After the $250K/$500K exclusion, here's what a typical seller might owe.
If Colorado is where your primary residence is located and you've lived there at least 2 of the last 5 years, you can exclude up to $250K (single) or $500K (married filing jointly) of your capital gain from both federal and state taxes.
Investment and rental properties in Colorado don't qualify for the exclusion. You'll owe 4.4% state tax plus federal tax on the full gain, plus 25% depreciation recapture on any depreciation claimed.
In Colorado, homes sold in January sell for 11% more than those sold in August (-7%). Timing your sale right can offset a significant portion of your tax bill.
Capital gains tax rates on home sales in Colorado and nearby states.
| State | Rate | Tax on $150K Gain | Notes |
|---|---|---|---|
Wyoming0% | 0% | $0 | No state income tax |
ColoradoYou | 4.4% | $6,600 | Flat tax rate |
| 4.65% | $6,975 | Flat tax rate | |
| 5.7% | $8,550 | Top marginal rate | |
| 5.84% | $8,760 | Top marginal rate | |
| 5.9% | $8,850 | Top marginal rate; 40% deduction available |
Selling in Wyoming instead of Colorado would save $6,600 in state tax on a $150K gain.
Colorado imposes a flat 4.4% income tax rate on all income, including capital gains. This flat rate simplifies tax planning for home sellers since there is no bracket creep to worry about. The rate is moderate compared to neighboring states, making Colorado reasonably competitive for real estate investors.
Colorado does not offer a separate capital gains rate or deduction for investment property sales. All gains are taxed uniformly at 4.4%. However, the state does allow certain deductions that can reduce your overall taxable income, including a partial deduction for retirement income that may benefit older sellers.
The Denver metro area and Front Range corridor have seen significant appreciation over the past decade, with many homeowners sitting on gains that exceed the federal exclusion. At Colorado's 4.4% rate, a $200,000 taxable gain results in $8,800 in state tax on top of federal obligations.
Mountain resort areas like Aspen, Vail, and Breckenridge often involve second homes that do not qualify for the primary residence exclusion. Sellers of ski properties and vacation homes should plan for the full combined federal and state tax bite, which can exceed 25% on long-term gains.
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