How Colorado State Taxes Work
Colorado keeps its income tax simple with a single flat rate of 4.4 percent, but the way it's applied is unusual. Instead of starting from scratch with its own deductions, Colorado taxes your federal taxable income, the number you reach after the federal standard deduction. So the deduction that shelters your federal tax shelters your Colorado tax too, and there's no separate state standard deduction to track. Run a $55,000 single income through it and Colorado income tax is about $1,712, an effective 3.1 percent of gross pay, moderate for a state with real public services.
Colorado voters also gave themselves the Taxpayer's Bill of Rights, or TABOR, which caps how much revenue the state can keep. In surplus years, the extra comes back to taxpayers, sometimes as a flat refund check and sometimes as a temporary rate cut at filing. That refund is separate from your paycheck; your employer still withholds at 4.4 percent. Every deduction, state and federal, is itemized on your pay stub, so it helps to know what each line means.
FAMLI: Colorado's Paid-Leave Deduction
The line most calculators forget is FAMLI, Colorado's Family and Medical Leave Insurance program. It funds paid family and medical leave, and for 2026 the premium is 0.88 percent of wages, split evenly between you and your employer, so your share is 0.44 percent up to the $184,500 cap. On a $54,000 salary that's about $238 a year. It's small, but it's a real deduction that lowers take-home, and a calculator that leaves it out will read a little high. If your employer also offers health insurance or a 401(k), those pre-tax deductions come out before taxes are figured, which lowers every line that follows.
The Denver Head Tax and the 2026 Minimum Wage
Colorado has no percentage local income tax, but a handful of cities charge an Occupational Privilege Tax, a flat monthly head tax on people who work there. Denver's is the best known at $5.75 a month for employees earning at least $500 in the month, roughly $69 a year, with Aurora, Greenwood Village, Glendale and Sheridan running smaller versions. On wages, Colorado's statewide minimum is $15.16 an hour in 2026, while Denver sets a higher $19.29, and both adjust each January. At $20 an hour, 40 hours a week is $800, about $41,600 a year, and a single filer at that rate with biweekly checks nets about $1,319 per check after Colorado tax and FAMLI.
Overtime in 2026: your overtime is withheld like normal wages all year. The federal deduction of up to $12,500 of overtime premium ($25,000 joint, through 2028) is claimed on your federal return. Because Colorado taxes federal taxable income, watch how that federal deduction changes your Colorado tax when you file. Your W-2 carries the amounts, explained in our guide to
overtime on the W-2 and code TT.
