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Corporate & Personal Income TaxCorporate Income Tax
Colorado’s income tax rate is a flat 4.63 percent of Colorado net income, defined as the corporation’s federal taxable income, with some modifications.The state's income tax is among the lowest of any state with a corporate income tax. Corporate income taxes were lowered twice during the past two years from 5 percent to 4.75 percent to the present 4.63 percent tax.
State method of apportioning income
Colorado is unique among states in that two alternative apportionment formulas have been adopted which allow the taxpayer to choose the method that produces the lesser tax liability. The taxpayer can make a decision annually on whether to use the standard three-factor formula or a special two-factor formula.
The three-factor formula averages the corporation’s wages, property, and sales in Colorado and compares that average to total wages, property, and sales to determine what proportion of its profits will be taxed.
The two-factor formula averages property and sales in Colorado only, and compares that average to the total property and sales.
Personal Income Tax
The state income tax rate for resident individuals, estates, and trusts is 4.63 percent of Colorado taxable income. To find the Colorado taxable income, use the following computation:
Allowable credits include taxes paid to other states, earned income credit and childcare/child tax credit for full-year and part-year residents.