Understanding Your Colorado Paycheck in 2025
If you live and work in the Centennial State, your paycheck reflects a simplified state tax structure compared to many other regions. However, new programs like FAMLI and specific local taxes (like Denver's OPT) add layers that can surprise you. This guide breaks down exactly how your take-home pay is calculated for 2025.
2025 Colorado Payroll Highlights
- State Tax: Flat 4.40% rate
- Standard Deduction: Uses Federal amounts
- FAMLI: 0.45% employee premium
- Denver OPT: $5.75/mo (local tax)
How Colorado Taxes Your Income
Colorado is a "flat tax" state, meaning almost everyone pays the same percentage of their taxable income, regardless of how much they earn. This contrasts with the federal system, which is progressive (higher earners pay higher rates).
State Income Tax (4.40%)
For 2025, the rate remains at 4.40%. This is applied to your Colorado Taxable Income, which generally mirrors your federal taxable income. Critically, this means the state respects the federal standard deduction ($15,000 for singles in 2025), so your first chunk of income is tax-free at the state level too.
FAMLI Program
The Family and Medical Leave Insurance (FAMLI) program is mandatory. The total premium is 0.9% of wages, split 50/50. Most employees see a 0.45% deduction from every paycheck, capped at the Social Security wage base ($176,100).
Federal & FICA Taxes
Before state taxes even touch your check, the federal government takes its share.
- Federal Income Tax: Progressive rates from 10% to 37%. Our calculator uses the official 2025 tax brackets and standard deduction.
- Social Security: 6.2% of your first $176,100 in earnings.
- Medicare: 1.45% on all earnings, with no cap. Earners over $200k (single) lay an extra 0.9%.
Case Study: Denver Professional
Scenario: $75,000 Salary (Single)
*Simplified example assuming standard deduction and no other pretax benefits.
Colorado Labor Laws & Overtime Rules (2025)
Understanding your paycheck isn't just about taxes; it's about making sure your employer is paying you correctly. Colorado has some of the most worker-friendly labor laws in the country. Visit the CDLE website for details.
Minimum Wage 2025
The statewide minimum wage is adjusted annually for inflation. For 2025, it sits at $14.42/hour (Denver is higher, typically around $18.29). Check your hourly wage.
*Tipped employees can be paid $3.02 less per hour, provided tips make up the difference.
Overtime Rules
Colorado is unique! You earn overtime (1.5x pay) if you work:
- More than 40 hours in a week OR
- More than 12 hours in a single day
- Or 12 consecutive hours (without a break)
Official 2025 Colorado Tax Brackets
One reason payroll in Colorado is simpler than in California or New York is the flat tax system. There are no complicated brackets to climb.
| Filing Status | Taxable Income Floor | Tax Rate |
|---|---|---|
| Single | $0 | 4.40% |
| Married Filing Jointly | $0 | 4.40% |
| Head of Household | $0 | 4.40% |
Note on TABOR Refunds: Due to the Taxpayer's Bill of Rights (TABOR), when the state collects revenue above a certain cap, it refunds the surplus to taxpayers. These refunds often appear as a flat check or a reduction in income tax liability in future years, effectively lowering your "real" tax rate below 4.40%.
Pay Frequency & "Wage Theft" Protection
Under the Colorado Wage Act, employers must pay you on regular, scheduled paydays. They cannot change this schedule without notice.
- Pay Period Frequency: Must be at least monthly or every 30 days. Most employers choose bi-weekly (every two weeks).
- Final Paychecks: If you are fired or laid off, you must be paid immediately (usually within 6-24 hours). If you quit, you are paid on the next scheduled payday.
- Vacation Pay: In Colorado, "use-it-or-lose-it" policies are strictly regulated. Earned vacation time is considered wages and must be paid out upon separation.
Moving to Colorado? Part-Year Resident Rules
Given the influx of new residents to Denver and Colorado Springs, many filers are "Part-Year Residents."
The "Apportionment" Method
Colorado does not tax income you earned before you moved here. However, calculate your tax bracket (not relevant for the flat tax, but relevant for some credits) based on your federal income.
- Step 1: Calculate tax on your entire federal income as if you lived in CO all year.
- Step 2: Divide your Colorado-sourced income by your Total Federal income to get a percentage (e.g., 40%).
- Step 3: Multiply the total tax by that percentage. You only pay the CO portion.
Hidden Local Taxes: It's Not Just State Tax
While the state income tax is simple, local occupational taxes can catch you off guard. These are often flat monthly fees irrespective of income.
Denver (OPT)
$5.75/mo
Occ. Privilege Tax if earning >$500/mo.
Aurora (OPT)
$2.00/mo
For earning >$250/mo.
Greenwood Village
$2.00/mo
Standard OPT rate.
Dual Income Households: The "Marriage Penalty" Myth
In progressive states, earning more as a couple can push you into a higher tax bracket. In Colorado's flat tax system, there is no marriage penalty on the rate itself.
*The calculated tax remains proportional. The only "penalty" might come from federal brackets, not the state.
Strategic Tax Planning for Colorado Residents
Even with a flat tax, there are ways to lower your effective tax rate. Colorado offers several unique deductions and credits that many residents overlook.
1. The "Re-Subtraction" Strategy
Colorado allows you to subtract certain income types even if they were taxed federally.
- Pension/Annuity Subtraction: Up to $20,000 for those under 65, and $24,000 for those 65+.
- Military Retirement: 100% tax-free for qualifying retirees.
- 529 Contributions: 100% deduction for contributions to CollegeInvest (no cap!). This is a massive benefit for parents.
2. TABOR Refunds
The Taxpayer's Bill of Rights (TABOR) strictly limits state revenue. When the economy is booming, the surplus must be returned to you.
Deep Dive: The FAMLI Calculation
The Family and Medical Leave Insurance (FAMLI) deduction confuses many new employees. It acts like a "state-level Social Security."
*Employers can choose to pay the full 0.9% themselves as a benefit, so check your paystub.
Frequently Asked Questions
Does Colorado tax 401(k) contributions?
No. Traditional 401(k) contributions are "pre-tax" for both federal and Colorado state income tax purposes. However, you still pay Social Security, Medicare, and FAMLI premiums on that money. Self-employed? Check the self-employed pay calculator.
What is the Denver OPT?
The Occupational Privilege Tax (OPT) is a "head tax" for working in certain cities like Denver or Aurora. If you work in Denver and earn over $500, you pay $5.75 per month. Your employer also pays a portion.
Can I opt out of FAMLI?
Generally, no. Most private sector employees in Colorado are required to participate. Local government employees may be exempt if their employer voted to opt out, but individuals can still voluntarily opt in.
Why did my paycheck go down in January?
This is common! Several things reset in January: 1. Social Security Tax: If you maxed it out last year, it restarts. 2. Health Insurance: Premiums often increase annually. 3. Benefit Elections: New FSA/HSA contributions start.