Colorado retired pay

Is military retirement taxed in Colorado?

Partly taxed

$15,000 Under 55, $24,000 at 65.

Partly. If you are under 55 on December 31, you subtract up to $15,000 of military retirement (tax years 2022 to 2028). At 55 to 64 the general pension subtraction allows $20,000, and at 65 or older $24,000, but any taxable Social Security you subtract uses up that same limit first.

The law: § 39-22-104(4)(y), C.R.S. (under 55) and § 39-22-104(4)(f), C.R.S. (pension and annuity subtraction)
Current rule since: tax year 2022 for the $15,000 under-55 limit, extended through tax year 2028 by HB23-1084; the $20,000 and $24,000 pension limits apply at 55 and older
Where you claim it: DR 0104AD, line 7 (spouse: line 8) if under 55 on December 31; line 4 (spouse: line 6) at 55 and older; the line 22 total goes to DR 0104, line 11

Read on Colorado’s own sources October 9, 2026

What Colorado’s rule is worth on your retired pay

Enter your annual taxable retired pay (box 2a of your DFAS or Coast Guard 1099-R). The rate starts at Colorado’s flat 4.4% rate for tax year 2025; change it to your own bracket if you know it.

One rate applied to the whole amount, not Colorado’s full return: brackets, other income, deductions and credits change the real figure. Use it to compare, then check the state’s own form instructions.

How it works in Colorado

Your age on December 31 picks the line. At 54 or younger on December 31, 2025, use DR 0104AD line 7 and subtract the smaller of $15,000 or your taxable military retirement; a spouse uses line 8. Send copies of every 1099-R with the return, as attachments if you e-file. Colorado starts from federal taxable income, and the subtraction reaches only retired pay included in it.

At 55 or older, military retired pay goes on line 4 (line 6 for the spouse) as ordinary pension income. The limit is $20,000 through age 64 and $24,000 from 65. Taxable Social Security subtracted on line 3 comes out of that limit first: at 65 or older, line 4 allows $24,000 minus the line 3 amount, and if line 3 is more than $24,000 the military pension gets no subtraction at all.

An assumed 66-year-old with $30,000 of taxable military retirement and $14,000 of taxable Social Security subtracts all $14,000 of Social Security on line 3 and only $10,000 of military pay on line 4. The total is still $24,000, but the pension's share shrank because Social Security went first.

Each spouse is measured alone. The booklet says military retirement and pension income must not be intermingled between spouses, and the department's pension publication adds that one spouse's income above the limit cannot use the other spouse's unused room.

At the 2025 flat rate of 4.4%, a $15,000 subtraction under 55 is worth $660 a year and a full $24,000 at 65 is worth $1,056. To fix a past year, amend in Revenue Online or on Form DR 0104X within four years of that return's original due date (not counting extensions), or three years from your last payment for that year, whichever is later. Mark the reason as Other and include an explanation.

Survivor Benefit Plan annuities

A survivor under 55 who receives pension or annuity income because of the death of the person who earned it may subtract up to $20,000 on DR 0104AD line 4, less any Social Security subtracted on line 3; at 55 or older the regular $20,000 or $24,000 limits apply. The department points death benefit recipients to distribution code 4 in box 7 of Form 1099-R and does not name SBP separately (read October 9, 2026).

Active-duty pay in Colorado

A Colorado resident's military pay is generally taxed wherever the member is stationed. A member stationed outside the U.S. for at least 305 days of the year may elect nonresident status, and a member with a Colorado home of record who reacquires Colorado residency can subtract active-duty pay on DR 0104AD line 17.

Missed it in an earlier year?

The statute of limitations for a refund claim is generally four years from the original due date of the return (excluding extensions) or three years from the date of last payment of tax for that year, whichever is later (2025 DR 0104X). Amend in Revenue Online or on Form DR 0104X.

What trips Colorado retirees up

The under-55 subtraction has an end date. HB23-1084 extended it only to income tax years commencing before January 1, 2029, and the department's limit table stops at 2028. SB25-136, which would have removed the pension caps from 2026, was lost in committee, and its 2026 successor, HB26-1062, was lost as well (status read October 9, 2026).
From 2025, a filer aged 55 to 64 with federal AGI of $75,000 or less (single) or $95,000 or less (joint) can subtract all taxable Social Security. Every dollar of it still reduces the $20,000 pension room left for military pay.
A retiree who turns 55 during the year moves from line 7 and its $15,000 limit to line 4 and its $20,000 limit for that whole year, because the department measures age at the end of the tax year.

Federal side: DFAS reports retired pay on Form 1099-R, and the IRS taxes it as a pension. VA disability compensation is not taxable income under federal law (IRS Publication 525). The SCRA’s tax-home rule (50 U.S.C. § 4001) protects servicemembers on orders, not retirees, so where a retiree lives decides which state taxes the pension. Compare every state on the 51-state ledger. Colorado’s other servicemember protections are on the Colorado SCRA page.

Frequently asked questions

Does Colorado tax military retirement?

Partly. The Colorado Department of Revenue's Retired Servicemembers page (read October 9, 2026) lets a retiree under 55 at the end of the tax year subtract up to $15,000 of military retirement for tax years 2022 through 2028. At 55 or older, military retired pay uses the regular pension and annuity subtraction: up to $20,000 through age 64 and $24,000 at 65 or older, reduced by any Social Security you subtract. Whatever remains is taxed at Colorado's flat 4.4% rate for 2025.

Does Social Security reduce the Colorado military retirement subtraction?

Yes, once you are 55. The 2025 DR 0104 booklet says the pension subtraction on DR 0104AD line 4 is $24,000 minus the Social Security subtracted on line 3 at age 65 or older, or $20,000 minus line 3 at ages 55 to 64. If line 3 is more than $24,000 at 65, military retired pay gets no subtraction. Under 55, the military subtraction on line 7 is separate, so Social Security does not reduce the $15,000.

Is SBP taxed in Colorado?

The department does not name SBP, but it treats pension and annuity income received because of someone's death as a death benefit. A survivor under 55 may subtract up to $20,000 of it on DR 0104AD line 4, less any Social Security on line 3, per the department's Social Security, Pensions and Annuities publication read October 9, 2026. At 55 or older the regular $20,000 or $24,000 limits apply. The department tells death benefit recipients to look for distribution code 4 in box 7 of Form 1099-R.

What happens to Colorado's under-55 military subtraction after 2028?

Under current law it ends. HB23-1084, signed June 5, 2023, extended the under-55 military retirement subtraction to income tax years commencing before January 1, 2029, and the Department of Revenue's table shows $15,000 for each year through 2028. Retirees under 55 in 2029 would have no military-specific subtraction unless the legislature extends it again. Retirees 55 and older keep the general pension subtraction, which has no end date in the department's guidance.

Sources, read October 9, 2026

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