Colorado Capital Gains Tax: What You'll Actually Owe
If you are selling appreciated property in Colorado, the state tax is only one of four layers, and usually not the one that does the most damage.
By Hans Goldstein, EA, Tax & Exit Planning · Updated
Admitted to practice before the IRS.
Colorado capital gains tax calculator
Enter your sale and see the 2026 tax in Colorado: federal capital gains tax, the 3.8% net investment income tax and Colorado state tax, then the same sale spread over the years the buyer pays you. It runs on the same engine as our capital gains tax calculator, in your browser. Rental property, your home, land, a business, stock or collectibles.
You keep $1,167,887 after selling costs and tax. The tax is 27.8% of your gain.
Your gain
- Sale price less selling costs$1,425,000
- Less your basis$500,000
- Your taxable gain$925,000
- Depreciation, taxed at up to 25%$150,000
- Long-term gain at 0%, 15% or 20%$775,000
The tax, line by line
- Federal income tax (incl. $7,830 AMT)$183,163
- Net investment income tax (3.8%)$33,250
- Colorado tax$40,700
- Total tax$257,113
- You keep$1,167,887
Get the REAL numbers
Talk to capital gains expert Hans Goldstein, EA.
These are estimates. Have a qualified tax professional run your real numbers in a 15-minute scope call.
Why now: the year you close and how the buyer pays you are set before closing, and they decide how much of this Colorado tax you keep.
Book my 15-minute callThis is an estimate. Getting it right down to the tee takes your actual tax forms (returns, K-1s, depreciation schedules), a consult and a paid analysis. The first 15-minute scope call is free.
Worked example (computed October 13, 2026)
A married couple in Colorado sells a rental for $1,500,000 with $75,000 of selling costs. Their adjusted basis is $500,000 after $150,000 of depreciation, and other income is $200,000. The gain is $925,000. All in one year the tax is $257,113: $183,163 federal, $33,250 net investment income tax and $40,700 Colorado tax, or 27.8% of the gain. Spread over 10 years on a note, the tax on the gain is $207,486, so they keep $49,627 more (interest on the note is taxed separately).
What is the tax bill on your Colorado sale going to be?
Send me the sale price and rough basis. Within one business day I'll email you the actual number and the Seller's Guide to §453. If it doesn't fit your deal, I'll tell you that plainly.
No retainer · no obligation. Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Go deeper: capital gains tax in Colorado when you sell a business, real estate or a farm on Big Sale Tax.
How does Colorado tax capital gains?
Colorado taxes capital gains as ordinary income at a flat 4.4%.
What taxes apply when you sell in Colorado?
Most sellers budget for one tax and get hit with four:
- Federal long-term capital gains at 0%, 15% or 20% depending on total taxable income for the year.
- Net investment income tax of 3.8% once modified AGI passes $200,000 single or $250,000 married filing jointly. Those thresholds are not indexed for inflation, so more sellers cross them every year.
- Depreciation recapture, if the asset was a rental or business property. The real-property portion is taxed at up to 25% as unrecaptured Section 1250 gain, and equipment is recaptured as ordinary income. See depreciation recapture.
- Colorado state tax at up to 4.4%, applied on top of everything above.
The result on a large sale is around 28.2%.
Why does the year of sale matter more than the rate?
Every one of those layers is triggered by income landing in a single tax year. The federal rate steps from 0% to 15% to 20% based on taxable income. The 3.8% surtax switches on at a fixed threshold. For sellers 65 and older, the new $6,000 senior deduction begins phasing out at $75,000 of modified AGI ($150,000 joint) and is fully gone by roughly $175,000 ($250,000 joint), so a single large sale wipes it out completely.
Spreading the same gain across several years keeps each year's income lower, and each layer is calculated on that lower number. That is the entire mechanism behind an installment sale under IRC §453, and it is why two sellers with identical gains can pay very different totals.
Recapture is the exception: under §453(i) it is recognized in the year of sale regardless of how payments are structured.
What does a $500,000 gain cost in Colorado?
Take a $500,000 long-term gain, on top of $200,000 of other income, married filing jointly.
That is roughly 28% of the gain before any recapture. The Colorado portion alone is about $22,000, money that has nothing to do with the federal rules everyone reads about.
If the asset was ever a rental or business property, add depreciation recapture: up to 25% on the real-property portion and ordinary rates on equipment.
The four layers, in the order they hit you
1. Federal capital gains. 0%, 15% or 20%, decided by your total taxable income for the year, including the gain itself. That is why one large sale lands people in the 20% bracket who normally sit far below it.
2. The 3.8% net investment income tax. Switches on above $200,000 modified AGI single, $250,000 married filing jointly. Those thresholds have never been indexed for inflation, so each year quietly captures more sellers.
3. Depreciation recapture. Only if you depreciated the asset. The real-property portion is unrecaptured Section 1250 gain at up to 25%; equipment is Section 1245 recapture at ordinary rates. The §1245 piece cannot be spread: §453(i) puts it in the year of sale. Unrecaptured §1250 gain on a building is spread with the payments.
4. Colorado tax. at up to 4.4%, applied on top of everything above.
Who can Colorado tax, and on what?
- Real property is taxed where it sits. If the property is physically in Colorado, Colorado taxes the gain whether or not you live there. Moving does not help you on in-state real estate.
- Everything else generally follows residency on the date of sale: business interests, stock, collectibles.
If you are a non-resident selling real property in Colorado, expect withholding at closing and a non-resident return the following spring. Withholding is an estimate, not the final tax.
Does spreading the sale help in Colorado?
Yes. Colorado taxes the gain as ordinary income, so the amount landing in a single year drives your state bracket as well as your federal one. Spreading the gain pulls both down at once, which is why the effect compounds in high-rate states.
An installment sale under IRC §453 spreads the gain across the years you actually receive payments, so every threshold above is tested annually instead of once.
The trade-offs deserve stating plainly: you need a buyer willing to pay over time, you carry collection risk, recapture still lands in year one, and large installment balances can trigger an interest charge under §453A. It fits some sales and not others, which is exactly what a conversation before closing is for.
Find out what your sale is really going to cost you in tax, and what you can do about it
No retainer. On a funded structure, the insurer pays a one-time commission of about 4% of the amount structured to the brokerage firm that places it (Hans’s share is about 2.4%; no trail). It is built into the annuity pricing, not a separate fee.
Find out what your tax bill actually looks like before you sell, including the parts your CPA may not raise until the return is already being prepared.
Most people find out what they owe after the sale closes, when nothing can be changed. A short conversation now tells you the number, which layers apply to your situation, and which options are still open while the sale is still in front of you.
- What you will actually owe: federal, the 3.8% surtax, recapture and your state
- Which of those layers you can still do something about
- Whether spreading the sale changes the number in your case
Hans Goldstein · 213-414-2808 · Hans Goldstein: Tax & Exit Planning · This is an educational conversation, not tax advice. Bring your CPA in before you file.
Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Selling a house in Colorado: what you'll actually owe
The home sale exclusion carries over. Colorado income tax starts from federal taxable income, so gain excluded under the federal Section 121 rule (up to $250,000, or $500,000 for married couples filing jointly) is not taxed by Colorado either. Gain above that, and gain on rentals or second homes, is taxable.
One flat rate, no capital gains break. Colorado taxes income at a single rate. The 2026 estimated tax form uses 4.4%, the same rate as 2025; the rate was temporarily cut to 4.25% for 2024 under the state's TABOR refund rules, and a similar reduction can occur in a given year. Long-term gains are taxed at the same rate as wages. Colorado's capital gain subtraction has been limited since 2022 to farmers selling agricultural land, so ordinary home sellers do not qualify.
Moving away does not erase the tax. Gain from real property located in Colorado is Colorado-source income, so nonresidents owe Colorado tax on it. Colorado regulations add that deferred gain on Colorado real property, including gain reported on an installment sale, remains Colorado-source income when it is finally recognized.
Nonresident withholding at closing. When a nonresident sells Colorado real estate, the closing agent withholds and sends the money to the Department of Revenue.
The withholding is a credit on the seller's Colorado return, not a separate tax. A seller with little or no gain can file the return to recover it.
Transfer taxes are small statewide, large in a few towns. Colorado has no state real estate transfer tax. Counties collect a state documentary fee of $0.01 per $100 of price when the price is greater than $500. Since 1992 the state constitution has prohibited new or increased real estate transfer taxes, but towns that already had one kept it. Examples:
- Aspen: 1.0% housing transfer tax plus 0.5% Wheeler transfer tax; exemption applications are filed by the purchaser.
- Telluride: 3% on sales within the town and Sunset Ridge.
Who pays these local taxes depends on the purchase contract and the town's rules.
Common mistakes: assuming the 2% withheld at closing is the final tax (the actual tax is figured on the gain at the flat rate), expecting a lower rate for long-term gains, and overlooking mountain town transfer taxes when estimating closing costs.
Rates and forms change; confirm current rules with a CPA or at tax.colorado.gov.
Worked example: a Colorado home sale in 2026
Assumptions: married filing jointly, a home bought for $400,000 including improvements and sold for $1,200,000, lived in for at least 2 of the last 5 years. The $800,000 gain minus the $500,000 exclusion leaves $300,000 of taxable long-term gain, on top of $150,000 of other taxable income.
This is arithmetic on stated assumptions, not a projection of anyone's actual bill. For how the exclusion works when the gain runs past it, see capital gains on a home sale over the exclusion.
Frequently asked
Q: What is the Colorado capital gains tax rate? A: Up to 4.4%. Colorado taxes capital gains as ordinary income, so the rate depends on your total income for the year.
Q: Does Colorado have a lower rate for long-term capital gains? A: No. Colorado applies the same rates to long-term and short-term gains. The preferential 0/15/20% treatment exists only at the federal level.
Q: How do I calculate capital gains tax in Colorado? A: Start with your sale price minus your adjusted cost basis, which is what you paid plus improvements minus any depreciation you took. That gain is then subject to federal capital gains rates, potentially the 3.8% net investment income tax, depreciation recapture if it was a rental, and Colorado tax. The calculator on this site layers all four.
Q: Can I avoid Colorado capital gains tax by moving before I sell? A: Residency changes are scrutinised closely and the facts matter a great deal, including where you lived at closing and whether the asset is real property physically located in the state. Real estate is generally taxed by the state where it sits regardless of where you live. Talk to a CPA before relying on this.
Selling something specific in Colorado?
- Selling real estate in Colorado
- Selling a business in Colorado
- Selling a mobile home park in Colorado
- Selling a self-storage facility in Colorado
- Selling a dental practice in Colorado
- Selling a veterinary practice in Colorado
- Selling a SaaS business in Colorado
- Selling an insurance book of business in Colorado
Run your specific numbers
The calculator runs your sale through real 2026 federal + state tax brackets and shows §453 savings vs lump sum side-by-side.
Run the calculator → 213-414-2808