What’s new for Colorado in tax year 2025

Two things on the 2025 Colorado return will be noticed by almost everyone, and neither is a new tax policy. The rate went back up to its normal 4.40% after a one-year cut, and the TABOR refund shrank to a fraction of last year’s. Below that headline there is a longer list: new refundable credits for care workers, college students and people on disability, a Social Security subtraction that now reaches people as young as 55, and a cleanup bill that retired a dozen little-used tax breaks. The new federal deductions for tips, overtime, seniors and car loan interest flow straight through to Colorado for 2025, with no addbacks until 2026.

The rate went back up, and the refund went way down

Rate: 4.25% to 4.40%. The 2024 rate was temporarily cut to 4.25% as a way of returning a large TABOR surplus. The 2024–25 surplus was small, so the cut did not repeat. The 2025 rate is the normal 4.40%. On $80,000 of Colorado taxable income that is $120 more tax than the same income produced in 2024.

TABOR refund: $177–$565 down to $19–$59. The state sales tax refund on the 2025 return runs from $19 to $59 per person ($38 to $118 on a joint return), depending on income. Most of the surplus went to reimbursing counties for the senior and veteran property tax exemptions before anything reached the refund. The full table by income is on the Colorado tax overview, and the mechanism behind the refund is explained in TABOR explained.

New for 2025

Four credits and one expanded subtraction that did not exist on last year’s return.

Social Security subtraction for ages 55 to 64

HB24-1142. A taxpayer who is 55 to 64 with federal AGI of $75,000 or less (single) or $95,000 or less (joint) now subtracts all federally taxable Social Security, the same as people 65 and older have done for years. Above those income limits, the old $20,000 pension and annuity cap still applies. People 65 and older are unaffected; their Social Security was already fully exempt. The subtractions for retirees are covered in more detail in Colorado for retirees.

Qualified care worker credit, $1,200

HB24-1312. A refundable $1,200 for child care workers registered in Colorado Shines and for direct care workers in long-term care (nursing homes, assisted living, and home- and community-based care) who worked at least 720 hours in the year, with AGI of $75,000 or less single or $100,000 joint. Child care workers need an attestation ID from the Department of Early Childhood. It is claimed on Form DR 1217 and runs for tax years 2025 through 2028.

Colorado Promise tuition and fee credit

HB24-1340, as amended by SB25-319. A refundable credit for out-of-pocket tuition and fees, after grants and scholarships, at a Colorado public college. It is for students who enroll within two years of high school graduation, with household income of $90,000 or less, carrying at least six credits with a 2.5 GPA. The student claims it, not the parents, using a certificate from the school. It covers the first 65 credit hours.

Disability assistance credit, $400 to $1,200

HB24-1268. This replaces the disability route into the PTC rebate. It is refundable, for people who were totally disabled and receiving full disability benefits all year, Colorado residents all year, with AGI of $20,000 or less (single) or $32,000 (joint). Proof of benefits is attached to the return.

Wildfire mitigation credit, up to $1,000

This replaces the old wildfire mitigation subtraction. The credit is 100% of qualifying mitigation costs on Colorado property, up to $1,000, for taxpayers with federal taxable income of $129,200 or less.

Apprenticeship credit, for employers

HB24-1439. For businesses, not individuals: $6,300 per registered apprentice employed at least six months, plus $1,050 per additional month up to $12,600, for up to ten apprentices a year. It must be certified by Apprenticeship Colorado before the return is filed. Also new for businesses in 2025 are credits for employee ownership conversions, affordable housing in transit communities, and middle-income housing.

Amounts that changed

The Colorado earned income credit stays at 50% of the federal credit for 2025 and drops to 25% for 2026.

Figures from the Department of Revenue’s December 2025 update, the 2025 forms, and its income tax topic publications. The family affordability credit was paid in full for 2025 because the state’s revenue trigger was met.

What ended after 2024

Most of these were repealed by HB24-1036, a cleanup bill that retired little-used tax breaks. Carryforwards from earlier years can still be used where noted.

Senior housing credit

The refundable credit of up to $800 for people 65 and older with income under $75,000 single or $125,000 joint was for 2024 only. SB25-013 would have brought it back for 2025 and 2026; it died in Senate Appropriations in May 2025. The Department of Revenue’s wording is that it “cannot be claimed for tax year 2025.”

Subtractions repealed

• First-time home buyer savings account interest
• Medical savings account, and employer MSA contributions
• Catastrophic health insurance
• Nonresident disaster relief worker income
• Wildfire mitigation (now a credit instead)

Credits closed to new claims

• School-to-career investment (carryforward 5 years)
• Colorado Works program (carryforward 3 years)
• Employer paid leave for organ donation (carryforward 5 years)
• Disability funding committee license fee (carryforward 5 years)
• Food contributed to hunger relief: carryforwards ended

Last year for the early childhood educator credit

It is still available on the 2025 return, at $872 to $1,743 depending on credential level, but it was not extended. Many of the same workers may also qualify for the new $1,200 care worker credit, so both are worth checking.

How the 2025 federal tax law lands in Colorado

The federal bill signed in July 2025 created new deductions for tips, overtime, seniors, and car loan interest. Because Colorado starts from federal taxable income, each of these flows into the Colorado return unless the legislature says otherwise. How the state return is built from the federal one is laid out in How Colorado income tax works.

For 2025, everything flows through. The tips deduction, the overtime deduction, the $6,000 senior deduction and the car loan interest deduction all reduce Colorado taxable income on 2025 returns. There are no addbacks.

For 2026, overtime gets added back. HB25-1296, signed in May 2025, requires Colorado taxpayers to add back the federal overtime deduction starting with tax year 2026. A lawsuit claiming this violates TABOR is pending. Tips are not added back in any year. The details are on the 2026 page.

The QBI addback for high earners stays. The federal law made the 20% qualified business income deduction permanent. Colorado’s addback of that deduction for AGI over $500,000 single or $1,000,000 joint was going to expire after 2025; the August 2025 special session (HB25B-1001) made it permanent too. Nothing changes on the 2025 return.

The August 2025 special session changed nothing for 2025 returns. Every tax bill from that session takes effect in 2026: the permanent QBI addback, corporate “tax haven” rules, the end of the sales tax vendor fee, and an insurance premium tax change. The ones that reach individuals are covered on the 2026 page, and the changes already on the books for the year after that are on the 2027 page.