Colorado residents 55 to 64 can subtract all of their federally taxed Social Security benefits from state income only if adjusted gross income, or AGI, is $75,000 or less for a single filer or $95,000 or less on a joint return. That is the rule the Colorado Department of Revenue lays out for ages 55 to 64. People 65 and older face no income limit at all.
Where the $75,000 and $95,000 lines fall
The Department of Revenue’s income tax guidance on Social Security, pensions and annuities splits filers into two age groups. Anyone 65 or older can subtract the entire taxable amount of Social Security, the figure on line 6b of federal Form 1040 or 1040-SR, with no AGI limit. That rule covers tax years beginning January 1, 2022, and later.
Filers 55 to 64 get the same full subtraction only while AGI stays within the limit: $75,000 for single filers and $95,000 for joint filers. The department says that version applies to tax years beginning January 1, 2025, and later. Kiplinger’s state-by-state list for 2026 gives the same two figures for this year.
AGI counts more than the benefit check. A filer in this age group who is still working part time, drawing a pension or taking IRA withdrawals adds all of it to the total that gets measured against $75,000 or $95,000. Anyone 55 to 64 who is already collecting Social Security needs to know which side of the line the return lands on.
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What changes once income crosses the line
Above the threshold, the full subtraction disappears. The department says the cap that remains is $20,000, which is the general pension and annuity limit for this age group. Kiplinger describes it as the lesser of $20,000 or federally taxable retirement income.
The difference is easiest to see with a hypothetical single filer who is 60 and has $26,000 of taxable benefits. With AGI of $74,000, the whole $26,000 comes off the Colorado return. With AGI of $76,000, the subtraction tops out at $20,000, and the other $6,000 stays taxable.
Kiplinger puts Colorado’s income tax at a flat 4.4% of taxable income. On the hypothetical $6,000 left taxable, that works out to about $264 more in state tax. The amount is modest, but it arrives all at once when AGI moves just $2,000 past the line.
Joint filers face the same cliff at a higher number. A married couple filing together with AGI of $95,000 or less keeps the full subtraction, and a couple at $97,000 is held to the $20,000 limit. The department states the thresholds by filing status, so a single filer cannot borrow the joint figure.
A bill that would have lifted the pension cap died in 2025
Colorado lawmakers considered widening the break. Senate Bill 25-136 would have removed the age-based caps on the pension and annuity subtraction for tax years beginning on or after January 1, 2026, letting any filer subtract the full amount regardless of age or income.
The bill did not pass. The legislature’s bill page lists SB25-136 as lost, after the Senate State, Veterans, & Military Affairs Committee postponed it indefinitely on February 27, 2025. The bill was introduced February 5, 2025.
The bill’s summary also treats the Social Security rule as existing law, not a change it was making. It describes the same limits: filers 55 or older with AGI of $75,000 or less single or $95,000 or less joint, starting January 1, 2025. That matches the department’s guidance.
With the bill gone, the department’s guidance, last revised in January 2025, is the rule on the books. It lists no change for 2026. For the exact line to use on a return, the department points filers to the Individual Income Tax Filing Booklet, Form DR 0104, for the tax year in question.
One of eight states that still tax benefits
Colorado is not alone. Kiplinger counts eight states that tax Social Security income in 2026: Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah and Vermont.
In Colorado, the age 65 line matters most. Kiplinger notes that residents 65 and older can deduct all federally taxed Social Security, so many pay nothing on it. The 55-to-64 group gets the conditional version, which is why the AGI line carries so much weight for early retirees.
Because the 55-to-64 rule applies to tax years beginning in 2025, the first returns filed under the income test were 2025 returns. Returns for 2026, filed next spring, are measured against the same $75,000 and $95,000 figures, since the department’s guidance lists no change for the year.
The practical stakes fall on people near the line. A filer whose AGI sits at $70,000 single or $90,000 joint has only $5,000 of room before the full subtraction ends, and a larger IRA withdrawal, a capital gain or a part-time paycheck can use that room up.
Will a 2026 Colorado return land under the $75,000 or $95,000 line?
A Colorado filer who is 60 and drifts past $75,000 single or $95,000 joint loses the full Social Security subtraction and is held to the $20,000 cap. The order of withdrawals from IRAs and savings can decide which side of that line the return falls on.
The Retirement Tax & Withdrawal Planner covers the account withdrawal order and comes with four calculators, including a provisional income calculator that shows how much of a benefit check is taxed. Its part on a state’s retirement taxes is built for exactly this kind of income-line question.
Get the withdrawal-order planner and four tax calculators before AGI crosses the line →
More Financial Reading
- 21 Ways to Stretch a $2,087 Social Security Check
- 15 Places to Find Your Share of the $4.25 Billion States Give Back
- 15 Steps to Stop the Scams That Took $7.7 Billion From Seniors
This article was produced with AI assistance and edited for accuracy against the sources linked above.
