Many people planning to retire use the presence or absence of a state income tax as a litmus test for a retirement destination. This is a serious miscalculation since higher sales and property taxes can more than offset the lack of a state income tax. The lack of a state income tax doesnt necessarily ensure a low total tax burden. Following are the taxes you can expect to pay if you retire in Colorado:
State Sales Tax: 2.9% (food and prescription drugs exempt); many cities and counties have their own rates which are added to the state rate. Total could be as high as 9.9%.
Fuel & Cigarette Tax:
Diesel Fuel Tax: 20.5 cents/gallon
84 cents/pack of 20
Personal Income Taxes:
All taxpayers: 4.63% of Federal taxable income
Personal Exemptions/Credits: Federal amounts are automatically adopted.
Standard Deduction: None
Medical/Dental Deduction: Same as Federal taxes
Federal Income Tax Deduction: None
Retirement Income Taxes: Taxpayers 55-64 years old can exclude a total of $20,000 for Social Security and qualified retirement income. Those 65 and over can exclude up to $24,000. All out-of-state government pensions qualify for the pension exemption. The total exclusion may not be more than indicated from all exempt sources. However, Social Security/Railroad Retirement income not taxed by the federal government is not added back to adjusted gross income for state income tax purposes.
Retired Military Pay: Same as above
Military Disability Retired Pay: Retirees who entered the military before Sept. 24, 1975, and members receiving disability retirements based on combat injuries or who could receive disability payments from the VA are covered by laws giving disability broad exemption from federal income tax. Most military retired pay based on service-related disabilities also is free from federal income tax, but there is no guarantee of total protection.
VA Disability Dependency and Indemnity Compensation: VA benefits are not taxable because they generally are for disabilities and are not subject to federal or state taxes.
Military SBP/SSBP/RCSBP/RSFPP: Generally subject to state taxes for those states with income tax. Check with state department of revenue office.
The county assessor determines the value of property using a market, cost or income approach. For 2008 property taxes on real estate are assessed at 7.96% of the property's actual value. You can determine your property tax bill by multiplying the assessed value by the local tax rate.
A homestead exemption is available for qualifying seniors and the surviving spouse of a senior who previously qualified. Seniors must be at least age 65. It allows 50% (up to a maximum reduction of $200,000) in actual value of a primary residence to be exempt. The state pays the tax on the exempted value. The person must have owned and lived in the home for at least 10 years. refer to http://dola.colorado.gov/dpt/forms/docs/brochure121803final.pdf
Full-year Colorado residents age 65 or older, disabled, or a surviving spouse age 58 or older, may qualify for the Property Tax/Rent/Heat Rebate and/or the Property Tax Deferral. Qualified applicants can receive a rebate of up to $600 of the property tax and $192 of their heating expenses paid during the year, either directly or as part of their rent payments, by filing the Property Tax/Rent/Heat Rebate form. For further details and forms refer to m www.colorado.gov/cs/Satellite/Revenue/REVX/1216116072809
A property tax exemption is available to disabled veterans. For those who qualify, 50% of the first $200,000 in actual value of their primary residence is exempted. The state pays the exempted portion of the property tax. . Eligibility extends to applicants who:
a) Sustained a service-connected disability while serving on active duty in the Armed Forces of the United States;
b) Were honorably discharged; and
c) Were rated by the United States Department of Veterans Affairs as one hundred percent 'permanent and total' disabled.
VA unemployability awards do not meet the requirement for determining an applicant's eligibility. The applicant must have owned and occupied the home as his or her primary residence since January 1 of the year of application; however, limited exceptions to the ownership and occupancy requirements are detailed in the eligibility requirements section of the application. The application deadline is July 1. Application forms are available from the division of Veterans affairs website www.dmva.state.co.us/page/va/prop_tax
and from the Colorado Division of Property Taxation website http://dola.colorado.gov/dpt/forms/index.htm
Inheritance and Estate Taxes: There is no inheritance tax and the Colorado estate tax does not apply to decedents whose date of death is on or after January 1, 2005.
For further information, visit the Colorado Department of Revenue website www.colorado.gov/cs/Satellite/Revenue/REVX/1176842266433
or call 303-232-2446.
Jun 09 ++]