Does Colorado tax Social Security? Not from age 65, but it shrinks your pension subtraction

From age 65, no. Colorado lets you subtract every dollar of Social Security that your federal return taxes. Between 55 and 64 you can subtract all of it if federal AGI is $75,000 or less ($95,000 joint); above that, up to $20,000. Under 55, only benefits received because someone died count. The catch is that Social Security and pensions share one subtraction: from 65 it is capped at $24,000 per person, and every dollar of Social Security you subtract is a dollar less for pension or IRA income. So a retiree with $24,000 of Social Security pays Colorado tax on IRA withdrawals sooner, and in our single example the extra tax reaches $951 a year.

The rule, in Colorado's words

The 2025 instructions for line 3 of Form DR 0104AD: “If you were 65 years of age or older on December 31, 2025, you may claim the subtraction for the entire amount of the social security benefits you received that were included in your federal taxable income.” For ages 55 to 64 above the AGI limits: “If your federal adjusted gross income exceeded these thresholds, the subtraction you may claim is limited to $20,000.” The Department adds: “The subtraction is allowed only for Social Security benefits that are included in the taxpayer’s federal taxable income.”

The shared cap is in the line 4 instructions for pension and annuity income: “Age 65 or older, then you may subtract $24,000 minus any amount entered on line 3, or the total amount of your taxable pension/annuity income, whichever is smaller”. That is why the table below shows extra Colorado tax even though Colorado taxes none of the benefits themselves at 65.

What Social Security adds to your Colorado tax in 2026

Each row compares Colorado's 2026 income tax with your Social Security and without it, for the same IRA or 401(k) withdrawals. The difference is what your benefits cost you in Colorado tax, through every rule at once. For the single example, the extra tax starts once IRA withdrawals pass about $34,000, where the $24,000 cap runs out; for the couple, about $62,000. Without Social Security, the whole cap would have shielded the IRA withdrawals.

Computed with the same engine and figures as our eight-state tool: federal taxable Social Security from IRS Publication 915, the 2026 federal standard deduction including the extra amount at 65 and the senior deduction, and Colorado's rules above. No other income, itemized deductions or credits.

Social Security disability benefits

Social Security disability benefits are Social Security benefits for tax purposes. The IRS: “Social security benefits include monthly retirement, survivor, and disability benefits.” Colorado's subtraction depends on age, though: “If you were under age 55 on December 31, 2025, you can claim the subtraction only for social security benefits you received due to the death of the person originally entitled to the benefits.” So a Coloradan under 55 on disability benefits pays Colorado tax on whatever part the federal return taxes. At 55 and over, disability benefits get the same subtraction as retirement benefits.

Pensions and IRA withdrawals

Pensions, annuities and traditional IRA or 401(k) withdrawals share the subtraction described above: up to $24,000 per person from 65 and $20,000 from 55 to 64, minus that person's Social Security subtraction. Each spouse claims separately. Colorado's income tax rate is 4.40% by statute; in years when the TABOR revenue rules apply it can drop to 4.25%.

2027

We know of no change for 2027. A 2025 bill that would have removed the caps (SB25-136) did not pass.

The other states that tax Social Security

Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont. All eight side by side are in the eight-state tool, and every state with its own instructions in the all-states tool. How much of your Social Security the federal return taxes is in our taxable Social Security calculator.

Rechecks and changes

• September 30, 2026. First published.

Sources

• Colorado Department of Revenue, 2025 Individual Income Tax Guide (DR 0104 book), lines 3 to 6 of Form DR 0104AD
• Colorado Department of Revenue, Income Tax Topics: Social Security, Pensions and Annuities
• IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits
• Dollars Ahead, Retirement Tax by State (the eight-state tool and its test cases)

This page shows what published tax rules do to the example incomes. It is not tax, legal or financial advice. For a decision that matters, take your numbers to a professional licensed to advise you.