Colorado Income Tax Rates & Brackets (Tax Year 2025 — Filed in 2026)

Remote Workers and Multi-State Taxation

Living in Colorado, Working for Out-of-State Employer

As a Colorado resident, you owe Colorado income tax on ALL income, regardless of where your employer is located.

What this means:

• Employer location does NOT determine tax obligation
• Income from employers in other states is taxable in Colorado
• You must report all income on your Colorado resident return
• Colorado law taxes residents on their worldwide income

Example: A Colorado resident working remotely for a California company owes Colorado income tax on that income, not California income tax (unless the employee physically works in California).

Source: https://tax.colorado.gov/individual-income-tax-guide

Working in Colorado, Living in Another State

Non-residents who perform work physically in Colorado owe Colorado income tax on income earned from Colorado sources.

Physical presence rule:

• Income is sourced to Colorado based on where work is physically performed
• Days worked in Colorado generate Colorado-source income
• Days worked in your home state do not generate Colorado-source income

Example: A Wyoming resident who commutes to Colorado for work owes Colorado income tax on wages earned for days physically worked in Colorado.

Source: https://tax.colorado.gov/income-tax-topics-part-year-residents-nonresidents

⚠️ Interstate Tax Risk Indicator

Remote workers involving Colorado commonly encounter dual taxation complications with specific states:

Working with these states requires careful planning:

• New York – Applies “convenience of employer” rule that may tax remote workers living outside NY but working for NY employers
• California – Aggressive residency audits for extended work periods; no reciprocity with Colorado
• Pennsylvania – Complex local income tax structure in addition to state tax; no reciprocity with Colorado
• Connecticut – Complex credit system for taxes paid to other states
• Massachusetts – Has applied telecommuter sourcing rules

Key issue: Colorado has no reciprocal agreements with any other state. This means:

• Colorado residents working in other states must file returns in both states
• Non-residents working in Colorado must file both Colorado non-resident and home state resident returns
• Taxpayers claim a credit for taxes paid to other states on their resident state return

Source: https://tax.colorado.gov/income-tax-topics-part-year-residents-nonresidents

“Convenience of the Employer” Rule

Colorado does NOT apply a “convenience of the employer” rule.

Colorado sources income based solely on where work is physically performed, not based on employer convenience or preference.

What this means for Colorado residents:

• If you live in Colorado and work remotely for an employer in a state that applies the convenience rule (such as New York), that other state may attempt to tax your income
• You would owe Colorado income tax on all income as a resident
• You can claim a credit on your Colorado return for taxes paid to the other state
• This can result in complex multi-state filing requirements

Source: Colorado Department of Revenue guidance on sourcing rules

Reciprocal Agreements

Colorado does NOT have reciprocal agreements with other states.

This includes neighboring states such as:

• Wyoming
• Nebraska
• Kansas
• Oklahoma
• New Mexico
• Arizona
• Utah

What this means:

• Colorado residents working in other states cannot avoid filing non-resident returns in those states through reciprocity
• Non-residents working in Colorado must file Colorado non-resident returns
• Multi-state workers must file returns in multiple jurisdictions and claim credits for taxes paid to other states

Source: Colorado Department of Revenue and comparative state tax research

Multi-State Tax Filing

When earning income in multiple states:

Step 1: File a resident return in Colorado reporting all income from all sources

Step 2: File non-resident returns in other states where you earned income

Step 3: Claim a credit on your Colorado return for taxes paid to other states

Forms required:

• DR 0104 (Colorado resident return)
• DR 0104AD (Subtractions from Income Schedule – to claim credit for taxes paid to other states)
• Non-resident returns for other states as applicable

Credit calculation: The credit for taxes paid to another state is limited to the lesser of:

• The actual tax paid to the other state, OR
• The amount of Colorado tax attributable to income from the other state

Source: https://tax.colorado.gov/sites/tax/files/documents/ITT_Credit_for_Tax_Paid_to_Another_State_Jan_2024.pdf