SB 25-138

Senate Bill 25-138 reduces Colorado's state income tax rate from 4.4% to a permanent 4.25%, starting in 2025. It further plans to eliminate the income tax for individuals, estates, and trusts entirely by 2035. This bill affects all taxpayers in Colorado who pay state income taxes and has been signed into law, meaning these lower rates will go into effect as scheduled unless there are changes made before implementation.

Official Summary

Under current law, the state income tax rate imposed on the taxable income of individuals, estates, trusts, and corporations is 4.4%; except that, for the income tax year commencing on January 1, 2024, the income tax rate is 4.25% and for any income tax year commencing on or after January 1, 2025, but before January 1, 2035, the income tax rate is temporarily reduced if state revenue exceeded the limitation on state fiscal year spending imposed by section 20 (7)(a) of article X of the state constitution for the state fiscal year that ended during the income tax year. The extent to which the rate is temporarily reduced depends on the total amount of excess state revenues remaining after homestead exemption reimbursements and qualified-senior primary residence reimbursements are paid. The bill makes the 4.25% tax rate permanent beginning with the income tax year commencing on January 1, 2025, makes any additional temporarily reduced income tax rate permanent for subsequent income tax years, and eliminates the state income tax on individuals, estates, and trusts for income tax years commencing on or after January 1, 2035. (Note: This summary applies to this bill as introduced.)