Roth Conversion in Colorado

A Roth conversion in Colorado is taxed at the state’s flat 4.40% individual income tax rate for tax year 2026, because Colorado income tax starts from your federal taxable income and the converted amount flows straight into that base (Source: Tax Foundation, “Colorado Tax Rates & Rankings,” 2026).

Does Colorado tax a Roth conversion? The 4.40% flat-rate answer

Yes. When you convert a traditional IRA or 401(k) to a Roth, the converted amount is reported on federal Form 1099-R and enters your federal taxable income. Colorado starts from that federal figure, so the conversion is picked up automatically and taxed at the flat 4.40% rate for 2026 (Source: Tax Foundation, “Colorado Tax Rates & Rankings,” 2026).

There is no separate Colorado conversion penalty and no bracket to climb; the rate is the same on the first dollar and the last. Colorado is a flat-tax state with no income brackets, which makes the state side of a conversion arithmetic simple: multiply the taxable conversion amount, after any subtraction you qualify for, by 0.044. One planning note on the rate itself: 4.40% is the statutory baseline for 2026. Under Colorado’s TABOR surplus mechanism the rate has been temporarily reduced in prior years (it was 4.25% for tax year 2024), and 2026 could again be trimmed retroactively if state revenue targets are met. That reduction is not knowable in advance, so model your conversion at 4.40% and treat any TABOR cut as a refund, not a plan input (Source: Tax Foundation 2026; NerdWallet, “Colorado State Income Tax: Rates, Who Pays in 2026”).

The 4.40% state cost sits on top of the federal tax, where a conversion is ordinary income taxed up to 37% in 2026. For a broader view of how the state number changes the decision, see our overview of Roth conversion state taxes and the core method behind Roth conversion planning.

Does a Roth conversion qualify for the Colorado pension and annuity subtraction?

It can, but only if you are 55 or older and only up to a shared cap. Because a Roth conversion is a distribution from a traditional IRA or 401(k) and is not subject to the federal 10% early-distribution penalty, it counts as qualifying “pension and annuity income” under Colorado’s subtraction. The subtraction offsets up to $20,000 for ages 55-64 or $24,000 for age 65 and older (Source: 1 CCR 201-2 Rule 39-22-104(4)(f)).

A key point that is easy to miss: the $20,000 / $24,000 figure is a single combined cap, not a separate allowance for each income type. It covers your pension, your regular IRA withdrawals, your annuity payments, and your conversion, all together. A 66-year-old already drawing a $30,000 pension has fully used the $24,000 subtraction on the pension alone, so the entire conversion is taxed at 4.40% with no shelter. A retiree with little other qualifying income can absorb up to $24,000 of the conversion itself. Real taxpayers get this wrong on public tax forums, and it materially changes how much room a conversion has.

Taxpayers under age 55 receive no pension and annuity subtraction at all, so the full conversion is taxed at 4.40%. Note also that distributions later taken from the Roth are excluded from federal gross income and therefore never qualify for the subtraction, the subtraction applies to the conversion event, not to the tax-free Roth withdrawals that follow.

The Colorado retirement income exclusion 2026, by age

The exclusion is age-banded and claimed per qualifying taxpayer, so a married couple who both meet the age test can each take their own subtraction on a joint return. The table below shows the 2026 caps and what each covers.

Source: 1 CCR 201-2 Rule 39-22-104(4)(f), Code of Colorado Regulations, current for 2026. For sizing the conversion against these caps, our guide on how much to convert to Roth walks through the year-by-year math.

Does Colorado tax Social Security, and the AGI cap that changes a conversion

Colorado does not tax Social Security for most retirees, but a conversion can break that for the 55-64 group. At 65 or older, you may subtract the full federally-taxable amount of your Social Security benefits. At 55-64, that full subtraction applies only when adjusted gross income is at or below $75,000 (single) or $95,000 (joint), for tax years 2025 and 2026 (Source: Colorado DoR “Income Tax Topics: Social Security, Pensions and Annuities”).

This is the second Colorado interaction. For someone aged 55-64, a Roth conversion inflates AGI. Push AGI past the $75,000 single / $95,000 joint threshold and the previously-untaxed Social Security becomes state-taxable, a cost stacked on top of the 4.40% on the conversion itself. One approach some taxpayers in the 55-64 band consider, if their goal is to preserve the Social Security subtraction, is to size a conversion so AGI stays at or below the threshold in those years and to weigh larger conversions after age 65, when the subtraction no longer has an income cap. Whether that fits depends on your other income, filing status, and goals, and is an individual timing question for your advisor and tax preparer.

Source: 1 CCR 201-2 Rule 39-22-104(4)(f); Colorado DoR “Income Tax Topics: Social Security, Pensions and Annuities.” For the federal side of the same question, see taxation of Social Security benefits in 2026.

Colorado tax on 401(k) and IRA withdrawals

Colorado taxes IRA and 401(k) distributions because they land in federal taxable income, then allows the same age-based subtraction: up to $20,000 (ages 55-64) or $24,000 (65+) per qualifying taxpayer for 2026, with the excess taxed at 4.40% (Source: 1 CCR 201-2 Rule 39-22-104(4)(f)). Colorado is not a full-exemption state like Pennsylvania, Illinois, or Mississippi, which broadly exclude qualified-plan retirement income; it shelters only up to the cap.

Because ordinary IRA and 401(k) withdrawals draw from the same $20,000 / $24,000 pool as a conversion, timing matters. In a year you take a large required minimum distribution, that RMD may consume most or all of the subtraction, leaving a conversion in the same year fully exposed to 4.40%. Public, private, and military pensions feed the same shared cap as well (Source: 1 CCR 201-2 Rule 39-22-104(4)(f)).

Did SB25-136 change Colorado retirement income rules for 2026?

No. SB25-136 would have removed the caps and allowed a full pension and annuity subtraction beginning January 1, 2026, but it did not pass. The Senate State, Veterans & Military Affairs Committee postponed it indefinitely on a 3-2 vote on February 27, 2025 (Source: Colorado General Assembly, SB25-136 “Expand Deduction For Retirement Benefits,” status “Lost,” leg.colorado.gov/bills/sb25-136). SB25-136 was not signed into law; it was postponed indefinitely, so the $20,000 / $24,000 caps remain in force for 2026. A near-identical 2026-session bill, HB26-1062 “Expand Deduction for Retirement Benefits,” met the same fate and was Postponed Indefinitely (Source: Colorado General Assembly, leg.colorado.gov/bills/HB26-1062). The $20,000 / $24,000 caps remain in force for 2026, so plan against the caps, not against a repeal that never happened.

Illustrative Colorado tax on a $100,000 Roth conversion

The table below is illustrative only and shows the Colorado state tax at 4.40% on a $100,000 conversion under four profiles. It ignores federal tax, which is separate and larger, and assumes no other income is already using the subtraction. Your actual result depends on age, other qualifying income, filing status, and AGI (Source for rate and caps: Tax Foundation 2026; 1 CCR 201-2 Rule 39-22-104(4)(f)).

The spread between the best and worst row here, $3,344 versus $4,400 on the identical $100,000, comes entirely from age and whether the shared cap is already spoken for. For a calculator-style walk-through of the state number, and how it interacts with the federal cost and the break-even timeline, see our Roth conversion break-even analysis.

How a Roth conversion affects Medicare premiums (IRMAA)

Colorado’s 4.40% is not the only second-order cost. A conversion spikes your modified adjusted gross income, and MAGI drives Medicare’s income-related monthly adjustment amount (IRMAA) for Part B and Part D two years later. A conversion in 2026 can therefore raise your 2028 Medicare premiums even though IRMAA is a federal surcharge, not a Colorado tax. We cover the thresholds in our Medicare IRMAA 2026 brackets and premiums guide; the Colorado-specific point is that the AGI you create for a conversion can hit the Social Security AGI cliff and an IRMAA bracket in the same year.

Colorado estate tax 2026 and the broader retiree picture

Colorado has no estate tax and no inheritance tax for 2026. No state exemption threshold or rate applies; only the federal estate tax could reach a Colorado estate (Source: Tax Foundation, “Colorado Tax Rates & Rankings,” 2026). That absence is one reason a Roth’s tax-free inheritance can be efficient for Colorado heirs, since the state adds nothing at death on top of the federal rules.

On property tax, Colorado offers a senior homestead exemption for owners 65 and older who have occupied the home as their primary residence for at least 10 consecutive years, exempting 50% of the first $200,000 of the home’s value (Source: C.R.S. 39-3-203; Colorado Department of Local Affairs, Division of Property Taxation). It does not touch a conversion, but it belongs in the full retiree tax view. For the federal estate side, see the 2026 estate tax exemption, and for the location question generally, moving to a tax-friendly state in retirement.

Part-year resident Roth conversion timing in Colorado

Which state taxes your conversion depends on where you are a legal resident on the day it happens. A Colorado full-year resident owes 4.40% on the conversion. Colorado residency turns on domicile, your permanent home, and Colorado also treats as a statutory resident anyone who keeps a permanent place of abode in the state and is present more than 183 days in the year (Source: C.R.S. 39-22-103; Colorado DoR “Part-Year Residents & Nonresidents”).

Federal law 4 U.S.C. 114 bars a state from taxing a nonresident’s IRA or retirement-plan income, so a conversion completed while you are a legal resident of a no-income-tax state such as Texas or Florida is not taxed by Colorado, even if you move to Colorado later. A part-year resident prorates on Schedule DR 0104PN and owes Colorado tax on the conversion only if it is received while a Colorado resident. If you are relocating, the conversion window relative to your residency change can decide whether the 4.40% applies at all.

Is Colorado tax friendly for retirees?

Colorado sits in the middle. It taxes retirement income but softens it: a flat 4.40% rate, an age-based pension and annuity subtraction of $20,000 / $24,000, a full Social Security subtraction at 65+ (and for 55-64 under the AGI caps), and no estate or inheritance tax (Sources: Tax Foundation 2026; 1 CCR 201-2 Rule 39-22-104(4)(f)). It is friendlier than high-bracket states but not a full-exemption state like Pennsylvania or Illinois.

For a Roth conversion specifically, the decision hinges on the two interactions covered above: the shared subtraction cap and, for the 55-64 group, the Social Security AGI cliff. A conversion that stays inside your unused subtraction and below the AGI threshold carries a low state cost; one that overshoots both can trigger 4.40% on the excess plus newly-taxable Social Security. That is why the timing and sizing, not just the flat rate, drive the outcome.

How Rothology plans a Roth conversion for Colorado residents

Rothology Premier Roth Conversion is a flat-fee, fiduciary planning service from Q3 Advisors. For Colorado residents, the multi-year plan projects each year’s conversion against the Colorado-specific rules: the flat 4.40% rate, the shared $20,000 / $24,000 pension and annuity subtraction, the 55-64 Social Security AGI cliff, and the IRMAA lookback. No products are sold; the engagement is educational and analytical.

A typical plan models how much of each year’s conversion the subtraction can absorb given your other pension and IRA income, where your AGI lands relative to the $75,000 / $95,000 Social Security thresholds, and how residency timing affects which state taxes the conversion. The work is factual tax projection, not a recommendation to convert, and it accounts for your federal bracket, break-even horizon, and estate goals alongside the Colorado numbers.

Frequently asked questions

Does Colorado tax Roth IRA conversions?

Yes. Colorado starts from federal taxable income, so a traditional-to-Roth conversion is included and taxed at the flat 4.40% rate for 2026 (Source: Tax Foundation 2026). There is no separate Colorado conversion penalty. If you are 55 or older, the pension and annuity subtraction can shelter part of it, up to $20,000 (55-64) or $24,000 (65+), shared with your other qualifying retirement income.

What is the Colorado state tax rate on a Roth conversion?

The flat individual income tax rate is 4.40% for tax year 2026, applied to the conversion amount that remains after any pension and annuity subtraction (Source: Tax Foundation, “Colorado Tax Rates & Rankings,” 2026). Colorado has no brackets. Note that a TABOR surplus could reduce the 2026 rate retroactively, but that is not knowable in advance, so plan at 4.40%.

How much retirement income is tax-free in Colorado?

Colorado’s pension and annuity subtraction shelters up to $20,000 of qualifying retirement income for ages 55-64 and up to $24,000 for age 65 and older, per qualifying taxpayer, for 2026 (Source: 1 CCR 201-2 Rule 39-22-104(4)(f)). This single cap is shared across pensions, IRA and 401(k) withdrawals, annuities, and Roth conversions. Amounts above the cap are taxed at 4.40%.

At what age do you stop paying taxes on retirement income in Colorado?

There is no age at which retirement income becomes fully tax-free in Colorado. At 65+ you get the larger $24,000 subtraction and a full Social Security subtraction with no income cap, but income above $24,000 from pensions, IRAs, or a conversion is still taxed at 4.40% (Source: 1 CCR 201-2 Rule 39-22-104(4)(f)). The 65+ threshold improves the math but does not eliminate the tax.

Does Colorado have an estate or inheritance tax?

No. Colorado imposes neither an estate tax nor an inheritance tax for 2026; there is no state exemption threshold or rate (Source: Tax Foundation, “Colorado Tax Rates & Rankings,” 2026). Only the federal estate tax could apply to a Colorado estate. This makes a Roth’s tax-free transfer to heirs efficient at the state level, since Colorado adds nothing at death.

Should I do a Roth conversion before moving to or after leaving Colorado?

It depends on where you are a legal resident on the conversion date. Federal law 4 U.S.C. 114 bars a state from taxing a nonresident’s IRA income, so a conversion done while you reside in a no-income-tax state is not taxed by Colorado (Source: C.R.S. 39-22-103; Colorado DoR). A conversion completed as a Colorado resident is taxed at 4.40%. This is an individual timing question for your advisor and tax preparer.

Does a Roth conversion push my Colorado Social Security into being taxed?

It can if you are 55-64. The full Social Security subtraction for that age band applies only when AGI is at or below $75,000 single or $95,000 joint. A conversion raises AGI, and crossing that threshold makes federally-taxable Social Security state-taxable too (Source: Colorado DoR “Income Tax Topics: Social Security, Pensions and Annuities”). At 65+ there is no AGI cap, so this trap does not apply.

Sources

• Tax Foundation, “Colorado Tax Rates & Rankings,” 2026 (flat 4.40% individual income tax; no estate or inheritance tax).
• Code of Colorado Regulations, 1 CCR 201-2 Rule 39-22-104(4)(f), “Pension and Annuity Subtraction” ($20,000 / $24,000 caps; qualifying IRA/401(k) and pension income).
• Colorado Department of Revenue, “Income Tax Topics: Social Security, Pensions and Annuities” (55-64 AGI caps of $75,000 single / $95,000 joint; 65+ full subtraction).
• Colorado Department of Revenue, “Income Tax Topics: Part-Year Residents & Nonresidents”; Schedule DR 0104PN; C.R.S. 39-22-103 (residency and domicile).
• Colorado General Assembly, SB25-136 “Expand Deduction For Retirement Benefits,” status “Lost” (postponed indefinitely February 27, 2025); HB26-1062 “Expand Deduction for Retirement Benefits” (2026 session), also postponed indefinitely.
• NerdWallet, “Colorado State Income Tax: Rates, Who Pays in 2026.”
• C.R.S. 39-3-203; Colorado Department of Local Affairs, Division of Property Taxation (senior homestead property-tax exemption: owners 65+, 10 consecutive years of primary residence, 50% of the first $200,000 of value).
• Federal: 4 U.S.C. 114 (nonresident retirement income); IRS rules on Roth conversions as ordinary income.