Estimates only — this is not tax advice. Consult a CPA or enrolled agent before acting on these figures. The calculator does not model the alternative minimum tax, wash sales, like-kind exchanges, QSBS, installment sales, or state additions and subtractions. See what is out of scope.
Show your work — 0 steps, each with its rule and citation
How Colorado taxes a capital gain
Statutory authority: Colo. Rev. Stat. § 39-22-104
A flat 4.40% on federal taxable income
Colorado levies a flat 4.40% income tax for tax years commencing on or after 1 January 2022. Capital gains are taxed as ordinary income at that rate, with no preferential long-term treatment and no bracket structure.
Colorado's tax is unusual in starting from FEDERAL taxable income rather than building its own base from scratch. That makes the state calculation unusually closely coupled to the federal one: federal deductions flow through, so a change in your federal position moves your Colorado bill too.
The capital gain subtraction is not in the current statute
Colorado historically allowed a subtraction for certain qualifying Colorado-source capital gains, subject to conditions on asset type, acquisition date and holding period. It is worth being direct about its present status: reading the current text of C.R.S. 39-22-104, the subtraction list covers pensions, education savings and military retirement benefits, and no capital gain provision appears among them.
This calculator therefore treats Colorado as taxing gains in full as ordinary income. If you have been told you qualify for a Colorado capital gain subtraction, confirm its current status before relying on it — the treatment here is the conservative one, and it will overstate rather than understate your bill if the subtraction does still exist for your situation.
TABOR refunds are not a capital gains provision
Colorado's Taxpayer's Bill of Rights caps state revenue growth and refunds the excess, sometimes as a temporary rate reduction and sometimes as a flat refund. In years when the mechanism triggers a rate cut, the effective rate for that year can come in below 4.40%.
This is a revenue-driven adjustment rather than a feature of the capital gains rules, and it is announced after the fact rather than known in advance. The figure here uses the standing statutory rate, which is the right basis for planning.
Starting from federal taxable income cuts both ways
Colorado's choice to begin from federal taxable income has a consequence worth understanding, because it makes federal planning unusually valuable here. Anything that reduces your federal taxable income generally reduces your Colorado bill too. The Section 121 home-sale exclusion is the clearest case: gain excluded federally never enters federal taxable income, so it never reaches the Colorado calculation either.
The same logic applies to the standard deduction, to capital losses netted against gains, and to the $3,000 loss allowance. In a state that built its own base from gross income, each of those would need to be argued separately. In Colorado they flow through, which means a single federal decision often moves both bills at once — and it is why the worked example below shows the exclusion reducing the Colorado figure without any state-specific provision being involved at all.
A worked Colorado example
Every figure below is computed by the same engine that powers the calculator above, at the moment this page was built — not typed in by hand. When the tax-year data is updated, this example updates with it.
A home sale where the exclusion covers most of the gain
A married Colorado couple with $120,000 of income sells the home they have lived in for years for $900,000, against an adjusted basis of $300,000 — a $600,000 gain.
- Taxable income after deduction
- $187,800
- Taxable gain
- $100,000
- Tax owed without the sale
- $10,040
- Tax the sale added
- $13,335
- Total federal tax
- $23,375
- Colorado state tax
- $4,400
- Effective rate on the gain
- 13.34%
The federal Section 121 exclusion removes $500,000 of the $600,000 gain before either government sees it. Colorado starts from federal taxable income, so the exclusion flows through to the state figure as well.
Caveats on this example (1)
- Net investment income was derived from capital gains and qualified dividends only. Interest, non-qualified dividends, rents, royalties and passive business income inside ordinaryIncome are also net investment income under IRC 1411(c) and are not counted here.
Show the working — 17 steps, each with its citation
- Gain on sale of principal residence$600,000
$900,000 amount realized less $300,000 adjusted basis.
- Maximum Section 121 exclusion$500,000
Owned for 60 months and used as a principal residence for 60 months in the 5-year lookback, both at least 24. No exclusion claimed in the prior 2 years.
- Section 121 exclusion applied-$500,000
$500,000 of gain is excluded from income, the lesser of the $500,000 maximum exclusion and the $600,000 of excludable gain.
- Taxable long-term gain from the home sale$100,000
Taxed at the long-term capital gain rates.
- Net short-term capital gain or loss for the year$0
Assets held one year or less. Taxed at ordinary rates if a net gain.
- Net long-term capital gain or loss for the year$100,000
Assets held more than one year. Eligible for the 0/15/20% rates.
- Standard deduction-$32,200
Adjusted gross income of $220,000 less $32,200.
- Taxable income$187,800
The figure the rate tables and the capital gain ceilings are both measured against.
- Ordinary income taxed at 10%$2,480
$24,800 of taxable income between $0 and $24,800.
- Ordinary income taxed at 12%$7,560
$63,000 of taxable income between $24,800 and $87,800.
- Ordinary income stacked below the long-term gain$87,800
Long-term gain is taxed by reference to where it sits ON TOP of $87,800 of other taxable income, not from the bottom of the rate table.
- Long-term gain taxed at 0%$0
Taxable income stays at or below the $98,900 maximum zero-rate amount.
- Long-term gain taxed at 15%$13,335
Gain between the $98,900 zero-rate ceiling and the $613,700 15% ceiling.
- Net investment income tax threshold$250,000
Modified AGI of $220,000 against the $250,000 threshold for married filing jointly. This threshold is statutory and is not adjusted for inflation.
- Net investment income tax does not apply$0
Modified AGI is $30,000 below the threshold.
- Colorado income tax at 4.4%$4,400
Flat 4.40% on federal taxable income, for taxable years commencing on or after 1 January 2022 (C.R.S. 39-22-104). NOTE: the long-standing Colorado capital gain subtraction is NOT present in the current text of 39-22-104, whose subtraction list covers pensions, education savings and military retirement but no capital gain provision. Colorado is therefore treated as taxing gains as ordinary income. Confirm the subtraction was in fact repealed before relying on this.
- Total tax$27,775
$27,775 on $220,000 of total income, an effective rate of 12.63%.
What this calculator does not cover for Colorado
The Colorado figure stacks your gain on your federal ordinary taxable income. Colorado computes its own taxable income with its own additions and subtractions, which are not modelled here — so treat the state number as a close approximation for a straightforward wage-and-sale situation, and as a rough one if your return carries significant state adjustments.
Full-year residency is assumed throughout. Part-year residents, non-residents, and gains sourced to property in another state all turn on rules this calculator does not model. The complete list of what is in and out of scope is on the methodology page.
Other states
- WashingtonNo income tax, but a 7% / 9.9% excise on long-term gains. Real estate exempt.
- TexasNo individual income tax. Federal tax still applies in full.
- IllinoisFlat 4.95% on everything. No preferential rate, no exclusion.
See the full 2026 capital gains guide for the federal rules that apply wherever you live — the rate ladder, the net investment income tax, the home-sale exclusion and depreciation recapture — plus every state we currently cover.