Capital Gains Tax

Capital Gains Tax in Colorado: Complete Guide 2026

Updated 2026-03-10

Data Notice: Figures, rates, and statistics cited in this article are based on the most recent available data at time of writing and may reflect projections or prior-year figures. Always verify current numbers with official sources before making financial, medical, or educational decisions.

Capital Gains Tax in Colorado: Complete Guide 2026

Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.

Colorado taxes capital gains as ordinary income at its flat 4.40% rate. There is no preferential rate for long-term gains, but Colorado’s flat rate is relatively moderate compared to coastal states. Colorado also offers a notable capital gains subtraction for certain qualifying Colorado-source gains, which can significantly reduce or eliminate the state tax on specific types of asset sales.

Colorado Capital Gains Tax Rates (2026)

ComponentRate
Colorado flat income tax rate4.40%
Long-term capital gains rate4.40% (same as ordinary income)
Short-term capital gains rate4.40% (same as ordinary income)
Federal long-term capital gains0%, 15%, or 20%
Net Investment Income Tax (NIIT)3.8% (MAGI over $200K / $250K MFJ)

Combined Federal + Colorado Rate on Long-Term Gains

Income LevelFederal RateCO RateNIITCombined
Below ~$48,3500%4.40%—4.40%
~$48,351 — ~$200,00015%4.40%—19.40%
~$200,001 — ~$533,40015%4.40%3.8%23.20%
Over ~$533,40020%4.40%3.8%28.20%

Colorado’s maximum combined rate of ~28.20% is well below California (~37.1%) and New York City (~37.3%), and only ~4.4% higher than no-income-tax states.

How It Works

Flat Rate on All Income

Colorado uses a flat income tax rate of 4.40% applied to federal taxable income with certain state-specific modifications. All capital gains — short-term and long-term — are taxed at this same rate. The simplicity of the flat rate means your capital gains tax calculation is straightforward: multiply your net capital gains by 4.40%.

Colorado Capital Gains Subtraction

Colorado offers a subtraction (deduction) for qualifying capital gains from the sale of certain Colorado-based assets. The subtraction applies to gains from:

  • Tangible personal property acquired, located, and used in Colorado for a business
  • Real property located in Colorado and owned for at least five years
  • Livestock held for draft, dairy, breeding, or sporting purposes for at least two years
  • Stock in a Colorado C corporation that meets specific criteria (at least 50% of employees, payroll, and property in Colorado, and the stock was held for at least five years)

The subtraction is limited and has evolved over time. Under current rules, the subtraction can exclude a significant portion of qualifying gains from state taxation. The subtraction is not automatic — you must identify the qualifying gain and claim it on your Colorado return.

Capital Loss Treatment

Colorado conforms to federal capital loss treatment. Losses offset gains, and up to $3,000 in net losses can be deducted against ordinary income. Unused losses carry forward indefinitely.

Comparison to National Average

MetricColoradoTypical State
Capital gains rate4.40% (flat)~0%—5%
Preferential long-term rateNone (but flat rate is moderate)Most follow federal
Capital gains subtractionYes (qualifying CO assets)Rare
Combined max rate (LT gains)~28.20%~28%—30%

Colorado’s 4.40% rate is very close to the national median for states with income taxes. The capital gains subtraction for Colorado-source assets is an uncommon benefit that rewards long-term investment in the state.

Tips for Minimizing Colorado Capital Gains Tax

  1. Claim the Colorado capital gains subtraction. If you are selling qualifying Colorado real estate (owned 5+ years), Colorado business assets, or Colorado C corporation stock, the subtraction can significantly reduce your state tax. Review the qualifying criteria carefully and maintain documentation of the asset’s Colorado nexus and holding period.
  2. Hold assets for the long term. While the state rate is the same regardless of holding period, the federal rate drops from up to 37% (short-term) to 20% (long-term). Combined with the state rate, holding for more than one year saves substantially.
  3. Harvest losses. Colorado conforms to federal loss rules. Offset gains with losses in the same year to reduce both federal and state tax obligations.
  4. Use retirement accounts. Gains within 401(k)s, IRAs, and Roth accounts are not subject to Colorado capital gains tax until distribution (never for Roth accounts).
  5. Donate appreciated assets. Avoid both federal and state capital gains tax by donating appreciated assets held more than one year to qualified charities.
  6. Consider the impact of the TABOR refund. Colorado’s Taxpayer’s Bill of Rights (TABOR) sometimes results in state tax refunds when revenue exceeds constitutional limits. While this does not directly reduce capital gains tax, it can offset part of the state tax burden in qualifying years.
  7. Plan installment sales for large transactions. Spreading gain recognition over multiple years does not change the flat 4.40% state rate but can reduce the federal rate by keeping income in lower brackets.

Key Takeaways

  • Colorado taxes all capital gains at its flat 4.40% rate with no distinction between short-term and long-term gains at the state level
  • The Colorado capital gains subtraction can exclude qualifying gains from Colorado real estate, business assets, and C corporation stock held for 5+ years
  • The combined federal-plus-state rate maxes out at ~28.20%, which is competitive nationally
  • Colorado conforms to federal capital loss treatment, including the $3,000 annual deduction against ordinary income
  • The flat rate structure makes tax planning straightforward — the state rate is the same regardless of income level
  • The capital gains subtraction is one of the few state-level incentives for long-term in-state investment

Next Steps