Welcome to Colorado. You owe us for August through December.
Leaving Colorado? We’ll stop at the state line. Mostly.
Here is where the line is.
Welcome. We’re glad to serve you.
Every year people arrive in Colorado from California, Texas and Illinois, and people leave for Arizona, Florida and the mountains of another state. Each move produces two state returns for one year, a question about which state gets to tax what, and in a few cases an argument about where you actually live. Colorado’s rules are simpler than most states’, which is good news for people arriving and occasionally bad news for people who thought they had left.
Below: how Colorado decides you are a resident, what a part-year return does, which income belongs to which state, the credit that prevents double tax, and the specific items that catch movers: the pension that follows you out, the remote job that doesn’t, the house sale as a nonresident, and the TABOR refund you lose by leaving in November.
You are a Colorado resident for income tax if either of two things is true. You are domiciled in Colorado: it is your permanent home, the place you intend to return to when you’re away, shown by your driver’s license, voter registration, vehicle registration, where your family lives, and where you spend your time. Or you keep a permanent place of abode in Colorado and spend more than six months of the year here, whatever you call home.
The second test is the one that catches snowbirds in reverse: a couple domiciled in Arizona who keep the Colorado house and spend seven months a year in it are Colorado residents. The first test is the one that catches people who moved but didn’t finish moving: the person who took a job in Dallas, rents an apartment there, and still has a Colorado license, a Colorado-registered car, a spouse in the Lone Tree house and a Colorado voter registration is, in Colorado’s view, still here.
Residency is decided by facts, and the facts are documents and days. If you move, change the license, the registration and the voter card in the first month, and keep a calendar. Colorado does not audit residency as aggressively as California or New York, but when it does, those are the questions.
↑ Back to topIn the year you move, you are a part-year resident, and you file the same Colorado return as everyone else plus one schedule, the DR 0104PN. The schedule lists your federal income by line and asks, for each line, how much of it is Colorado’s: income earned while you were a resident, plus any Colorado-source income from the nonresident part of the year. The ratio of Colorado income to total income is then applied to the tax, so you pay Colorado’s 4.40% on the Colorado share only. Deductions, the standard or itemized, are not separately apportioned; the ratio handles everything.
The date of the move is the date your domicile changed, which is normally the day you arrived at the new home to stay, not the day the lease was signed or the day the moving truck left. Pick it, document it, and use the same date on both state returns.
↑ Back to top| Income | Colorado taxes it when |
|---|---|
| Wages and salary | Earned while a resident, or for work physically performed in Colorado while a nonresident |
| Pensions, Social Security, IRA and 401(k) withdrawals | Received while a resident. Never taxed to a nonresident, by federal law, no matter where the pension was earned |
| Interest, dividends, capital gains on stock | Received while a resident; never Colorado-source for a nonresident |
| Rental income and sale of Colorado real estate | Always, resident or not. Colorado-source. |
| Business income (Schedule C, partnership, S corporation) | While a resident; for a nonresident, the share apportioned to Colorado activity |
| Gambling winnings in Colorado | Always, resident or not |
| Unemployment compensation | While a resident, and Colorado-source if paid by Colorado |
Timing is by the date received, not the date earned. A bonus paid in September for work done in the spring in Illinois is Colorado income if you were a Colorado resident in September. A capital gain belongs to the state you lived in on the day you sold, which makes the week of the move a poor time to sell stock if the states’ rates differ.
↑ Back to topIf you are a Colorado resident and another state also taxes some of your income, usually because you worked there, Colorado gives you a credit for the other state’s tax on that income, up to what Colorado would have charged on it. The income is taxed once, at the higher of the two rates. The credit goes on the resident state’s return, so a Colorado resident who works in Kansas files a Kansas nonresident return first, then claims the credit on Colorado’s. For a part-year resident the credit is only for income from the resident part of the year.
The credit doesn’t apply to the states with no income tax, which is most of where people move to and from: Texas, Florida, Washington, Nevada, Wyoming, South Dakota, Tennessee. There is nothing to credit; the Colorado part of the year is simply taxed and the rest isn’t.
↑ Back to topColorado taxes wages by where you are when you do the work. A Colorado resident working from home for a Chicago company owes Colorado on all of it and Illinois on none of it, unless you travel to Chicago, in which case those days are Illinois income. A few states (New York, Delaware, Nebraska, Pennsylvania, Connecticut and, in some situations, New Jersey) apply a “convenience of the employer” rule that taxes a remote employee as if they were in the office. Colorado does not, but if your employer is in one of those states and keeps a desk for you there, the other state may claim your wages and the Colorado credit will absorb some of it. Get the employer’s withholding set to Colorado the week you arrive; a W-2 showing a full year of another state’s withholding is a problem that takes two amended returns to fix.
↑ Back to topI retired, moved to Arizona, and PERA kept withholding Colorado tax for eleven months because nobody told them. Colorado refunded it, eventually. I have decided not to think about what the money would have earned.
↑ Back to topHe earns $130,000 with the same employer, working remotely; she starts a Colorado job September 1 at $70,000. They sold the Illinois house in July (gain covered by the exclusion), and sold $40,000 of stock in October for a $12,000 gain. Illinois withheld on his wages through August 31 because nobody updated payroll.
Illinois: part-year return, January 1 to July 31. His wages through July, their interest and dividends through July, the house sale (excluded anyway). Illinois’s flat 4.95% on that share.
Colorado: part-year return, August 1 to December 31. His wages for August through December ($54,000), all of her wages ($23,300), the $12,000 stock gain (sold while a resident), dividends and interest from August on. DR 0104PN produces a Colorado ratio of roughly 42% of their federal taxable income, taxed at 4.40%.
The overlap: Illinois withheld on his August wages, which are Colorado’s. Illinois refunds it on the part-year return; Colorado is owed it. No credit is involved, because no income was taxed by both states; it was simply withheld by the wrong one. Had he kept traveling to the Chicago office five days a month after the move, those days would be Illinois-source wages, taxed by both, and Colorado would give the credit.
TABOR: not eligible for 2026; they weren’t residents all year. Eligible for 2027.
Colorado’s side of a move is usually the easy half. The difficulty is the state you came from, if it was California or New York, or the state you went to, if it taxes things Colorado doesn’t. California in particular treats a departure skeptically when the taxpayer keeps a California house, a California business interest, or spends significant time there, and its residency audits can reach back years. If you are leaving a high-tax state, the documentation of the move is worth doing carefully in the year of the move, not reconstructing later. We prepare the Colorado side and the other state’s part-year return together, so the dates and the numbers agree, which is the main thing either state checks.
↑ Back to topNo. You file a part-year return: the regular DR 0104 plus Schedule DR 0104PN, which apportions your income to the months you lived here. You also file a part-year return in the state you left, for the months before.
No. Federal law prohibits any state from taxing a nonresident’s retirement income. Once you are an Arizona resident, PERA, your IRA withdrawals and Social Security are Arizona’s to tax, not Colorado’s. Tell PERA to stop Colorado withholding.
Colorado taxes all of it, because you do the work here. New York may also claim it under its convenience-of-the-employer rule if the company keeps an office for you there. If New York taxes it, Colorado gives you a credit for New York’s tax on that income, up to Colorado’s 4.40%.
The gain is Colorado-source and is taxed by Colorado even though you’re a nonresident, after the federal $500,000 exclusion. The title company must also withhold 2% of the sale price for Colorado at closing, which you recover on a nonresident return the next spring. Selling before you change residency avoids the withholding.
For the Tax Shop desk · forms, code sections, and the things that get missed
Pick the date, change the documents, and keep a calendar; that is most of residency. Then tell everyone who pays you: the employer, PERA, the IRA custodian, Social Security. The returns themselves are two part-year filings that have to agree with each other, and the most common error we fix is a W-2 with a full year of the wrong state’s withholding because no one updated payroll in August. If you are selling a house or a block of stock near the move, call first; a week either side of the date can be the difference between Colorado’s 4.40% and California’s 13.3%, or between a clean closing and 2% withheld for nine months.
Call 303-734-1040 or stop by the office in Lone Tree. We’ve been reading the footnotes for Douglas County and the Denver area since 1969.
Figures reflect the 2026 tax year as currently published and are rounded for readability. Items marked (verify) are to be confirmed against IRS or Colorado DOR sources before the figures freeze in December. Last updated October 15, 2026.
