Partly taxed
How Colorado taxes retirement income
Colorado taxes retirement income at a flat 4.4%, with a sizable exclusion based on age. If you are 65 or older at the end of the year, you can subtract all of your federally taxable Social Security. Since 2025, people 55 to 64 can also subtract all of their Social Security if their income is below set limits.
On top of that, Colorado lets each person subtract pension and annuity income, including PERA pensions, other states’ pensions, and IRA and 401(k) withdrawals. The limit is $20,000 a year for ages 55 to 64 and $24,000 for 65 and older, minus any Social Security already subtracted under the age-based rule.
That second part matters. A 66-year-old with $18,000 of taxable Social Security subtracts it in full, and then has $6,000 of room left for pension income. A retired PERA member who is not covered by Social Security has the full $24,000 for the pension. A married couple who both qualify each get their own limit.
Questions
Does Colorado tax PERA pensions?
Partly. Up to $20,000 (ages 55–64) or $24,000 (65+) per person of pension income is subtracted, reduced by any Social Security subtracted. The rest is taxed at 4.4%.
Does Colorado tax Social Security?
Not at 65 or older. People 55 to 64 can subtract all of it if their income is under the state’s limits.
Are IRA withdrawals covered?
Yes. IRA and 401(k) distributions count as pension and annuity income for the subtraction.