There is no estate tax in Colorado.1 Depending on the size of your estate, you may still owe estate tax to the federal government due to the federal estate tax. If you’re dealing with estate planning or are looking to get your finances and investments in order, some professional help could be in order. SmartAsset’s SmartAdvisor tool can help you find a financial advisor in your area.
Colorado Estate Tax
There is no estate tax in Colorado. It is one of 38 states with no estate tax.
What Is the Estate Tax?
The estate tax is levied on an estate after a person has died, but before the money is passed on to their heirs. It is sometimes referred to as the “death tax.”
The estate tax is different from the inheritance tax. That tax is levied after the money has passed on to the heirs of the recently deceased.
Colorado Inheritance Tax and Gift Tax
There is no inheritance tax in Colorado. Some states might charge an inheritance tax if the decedent dies in the state even if the heir lives elsewhere. In Kentucky, for instance, inheritance tax must be paid on any property in the state, even if the heir lives elsewhere.2
Colorado also has no gift tax. The federal gift tax exemption is $16,000 per recipient per year for 2022 and $17,000 per recipient per year for 2023. Gifting one person more than that limit in a single year will count against your lifetime exemption of $12.92 million.
Federal Estate Tax
Even though there is no estate tax in Colorado, you may still owe the federal estate tax. The exemption for that tax is $12.06 million for deaths in 2022 and $12.92 million in 2023. This tax is portable for married couples. That means that if the right legal steps are taken, a married couple can protect up to $25.84 million when both spouses die.3
If an estate tax exceeds that amount, the top federal tax rate is 40%. A full chart of federal estate tax rates is below.
Here’s an example of how it works: Let’s consider an estate worth $14.86 million that belongs to an unmarried individual. To determine the total estate tax burden, you’ll first need to subtract the $12.92 million exemption, leaving a taxable estate of $1.94 million. The first $1 million has a base tax payment of $345,800. An additional 40% is owed on the remaining $940,000 million, which totals $376,000. Add that figure to the base rate and you’ll get the total estate tax burden for this estate, which is $721,800.4
FEDERAL ESTATE TAX RATES
| Taxable Estate* | Base Taxes Paid | Marginal Rate | Rate Threshold** |
| $1 – $10,000 | $0 | 18% | $1 |
| $10,000 – $20,000 | $1,800 | 20% | $10,000 |
| $20,000 – $40,000 | $3,800 | 22% | $20,000 |
| $40,000 – $60,000 | $8,200 | 24% | $40,000 |
| $60,000 – $80,000 | $13,000 | 26% | $60,000 |
| $80,000 – $100,000 | $18,200 | 28% | $80,000 |
| $100,000 – $150,000 | $23,800 | 30% | $100,000 |
| $150,000 – $250,000 | $38,800 | 32% | $150,000 |
| $250,000 – $500,000 | $70,800 | 34% | $250,000 |
| $500,000 – $750,000 | $155,800 | 37% | $500,000 |
| $750,000 – $1 million | $248,300 | 39% | $750,000 |
| Over $1 million | $345,800 | 40% | $1 million |
*The taxable estate is the total above the federal exemption of $12.92 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall Colorado Tax Picture
Colorado is a fairly tax-friendly state for retirees. Social Security, retirement accounts and pensions are all partially taxed. Colorado has a flat income tax rate of 4.40%. Our free Colorado paycheck calculator can help figure out what your take home pay in the Centennial State will be.
Property taxes in Colorado are among the lowest in the country, with an average effective rate of just 0.48%. The statewide sales tax in Colorado is just 2.9%, but with local sales taxes the statewide average is 7.77%.
Estate Planning Tips
- Planning an estate, in Colorado or elsewhere, isn’t easy. If you’re beginning this process – or in the midst of it – you might want to consider getting professional advice in the form of a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- When planning your estate, you’ll want to know exactly how much money you’ll have saved when you retire. Use SmartAsset’s Social Security calculator to see just how much you’ll be getting from the government once you retire.
- Above all else, make sure you have a plan for your estate. Even if you’re young, think about what you want to have happen once you die. Hopefully it doesn’t get used for a long time, but having an estate plan can give you and your family peace of mind.
Sources
- “Estate Tax.” Colorado General Assembly. https://leg.colorado.gov/agencies/legislative-council-staff/estate-tax.
- “Inheritance & Estate Tax.” Kentucky Department of Revenue. https://revenue.ky.gov/Individual/Inheritance-Estate-Tax/Pages/default.aspx.
- “Frequently Asked Questions on Estate Taxes.” Internal Revenue Service, August 9, 2023. https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-estate-taxes.
- “Estate Tax – Missouri Estate Tax Filings No Longer Required.” Missouri Department of Revenue. https://dor.mo.gov/taxation/individual/tax-types/estate.html.
Photo credit: ©iStock.com/alexskopje, SmartAsset, ©iStock.com/pabradyphoto