Does Colorado tax retirement income? IRAs, Roth conversions and Social Security (2026)

Partly. Colorado taxes income at a flat 4.4% for 2026. But from age 55 you can subtract pension and IRA income up to a yearly limit per person. Your Social Security is subtracted too, and it uses up part of that same limit.

Yes. Your state return starts with your federal taxable income. Your Roth conversion is in that income, so it lands on your state return and is taxed at 4.4%.

If you are 55 or older, you may get part of it back through the pension and annuity subtraction. The state's rule for it lists IRA payouts as qualifying income. It says they don't have to be regular payments. The rule is 1 CCR 201-2, Rule 39-22-104(4)(f), used with Form DR 0104.

The rule does not mention Roth conversions. A conversion is federally taxed as a traditional IRA payout, so it appears to qualify. Since the state hasn't said so directly, confirm with a Colorado-licensed tax preparer before you count on it.

4.4%. Voters set that rate starting in 2022. The state's 2026 estimated tax worksheet figures tax at 4.4% of estimated taxable income. The 2025 return booklet says the rate is currently 4.4%.

The state can lower the rate for one year when it collects more than the TABOR limit. TABOR is the state's Taxpayer's Bill of Rights. That happened for 2024, when the rate was 4.25%. Whether a cut applies in a given year depends on that year's surplus. We found no official notice of a 2026 one-year cut as of Nov 9, 2026, so plan with 4.4%.

You can subtract taxable pension and annuity income, including IRA payouts, up to a yearly limit. The limit depends on your age on December 31. On a joint return, you and your spouse each figure your own subtraction on your own income.

Three rules matter for your conversion:

• IRA payouts that carry the federal early withdrawal penalty don't qualify. Most conversions aren't penalized. But tax withheld from a conversion before 59½ usually is.
• Lump-sum payouts from employer plans, such as a 401(k), don't qualify under the rule. It's unclear how the state treats a direct 401(k) to Roth IRA rollover, so ask a Colorado preparer.
• Your qualified Roth IRA withdrawals later aren't in federal income, so they don't need the subtraction at all.

At 65 and older, you can subtract all of your federally taxable Social Security. But the 2025 booklet says your pension subtraction is $24,000 minus that Social Security amount. If your taxable Social Security is $24,000 or more, you have no pension subtraction left for IRA income.

Say $10,000 of your Social Security is federally taxable. You can still subtract up to $14,000 of IRA income, conversion included. A conversion can also make more of your Social Security federally taxable (see Conversions and Social Security). That shrinks your room further.

From 55 to 64, your Social Security is fully subtractable only if your federal AGI is $75,000 or less (single) or $95,000 or less (joint). Above that, it's capped at $20,000. A conversion raises your AGI. So if you are in this age range and already get benefits, it can lower your Social Security subtraction too.

A very large conversion can trigger a state addback. For 2025, if your federal AGI is over $300,000, you add back standard or itemized deductions above $12,000 (single) or $16,000 (joint). Check the 2026 booklet for that year's version.

If you live in Colorado for part of the year, you file Form DR 0104PN. It prorates your tax to income you got while living there or from sources in the state. If you are moving to a state such as Arizona, your conversion date affects which state taxes it.

To avoid a surprise bill, check your estimated tax. You generally need to make estimated payments if you'll owe more than $1,000 in net state tax for 2026. That is after withholding and credits. The state's DR 0104EP form says so. You can also have tax withheld from the conversion.