Moving to or from Colorado

Every year people arrive in Colorado from California, Texas and Illinois, and people leave for Arizona, Florida and the mountains of another state. Each move produces two state returns for one year, a question about which state gets to tax what, and in a few cases an argument about where you actually live. Colorado’s rules are simpler than most states’, which is good news for people arriving and occasionally bad news for people who thought they had left.

Below: how Colorado decides you are a resident, what a part-year return does, which income belongs to which state, the credit that prevents double tax, and the specific items that catch movers: the pension that follows you out, the remote job that doesn’t, the house sale as a nonresident, and the TABOR refund you lose by leaving in November.

Who Is a Colorado Resident

Colorado calls it: domicile, or a permanent place of abode plus six months

You are a Colorado resident for income tax if either of two things is true. You are domiciled in Colorado: it is your permanent home, the place you intend to return to when you’re away, shown by your driver’s license, voter registration, vehicle registration, where your family lives, and where you spend your time. Or you keep a permanent place of abode in Colorado and spend more than six months of the year here, whatever you call home.

The second test is the one that catches snowbirds in reverse: a couple domiciled in Arizona who keep the Colorado house and spend seven months a year in it are Colorado residents. The first test is the one that catches people who moved but didn’t finish moving: the person who took a job in Dallas, rents an apartment there, and still has a Colorado license, a Colorado-registered car, a spouse in the Colorado house and a Colorado voter registration is, in Colorado’s view, still here.

Residency is decided by facts, and the facts are documents and days. If you move, change the license, the registration and the voter card in the first month, and keep a calendar. Colorado does not audit residency as aggressively as California or New York, but when it does, those are the questions.

The Part-Year Return

Colorado calls it: Form DR 0104 with Schedule DR 0104PN

In the year you move, you are a part-year resident, and you file the same Colorado return as everyone else plus one schedule, the DR 0104PN. The schedule lists your federal income by line and asks, for each line, how much of it is Colorado’s: income earned while you were a resident, plus any Colorado-source income from the nonresident part of the year. The ratio of Colorado income to total income is then applied to the tax, so you pay Colorado’s 4.40% on the Colorado share only. Deductions, the standard or itemized, are not separately apportioned; the ratio handles everything.

The date of the move is the date your domicile changed, which is normally the day you arrived at the new home to stay, not the day the lease was signed or the day the moving truck left. Pick it, document it, and use the same date on both state returns.

Which Income Goes Where

The rule: residence for most income, source for some

Income	Colorado taxes it when
Wages and salary	Earned while a resident, or for work physically performed in Colorado while a nonresident
Pensions, Social Security, IRA and 401(k) withdrawals	Received while a resident. Never taxed to a nonresident, by federal law, no matter where the pension was earned
Interest, dividends, capital gains on stock	Received while a resident; never Colorado-source for a nonresident
Rental income and sale of Colorado real estate	Always, resident or not. Colorado-source.
Business income (Schedule C, partnership, S corporation)	While a resident; for a nonresident, the share apportioned to Colorado activity
Gambling winnings in Colorado	Always, resident or not
Unemployment compensation	While a resident, and Colorado-source if paid by Colorado

Timing is by the date received, not the date earned. A bonus paid in September for work done in the spring in Illinois is Colorado income if you were a Colorado resident in September. A capital gain belongs to the state you lived in on the day you sold, which makes the week of the move a poor time to sell stock if the states’ rates differ.

Two States, One Tax

Colorado calls it: the credit for tax paid to another state, DR 0104CR

If you are a Colorado resident and another state also taxes some of your income, usually because you worked there, Colorado gives you a credit for the other state’s tax on that income, up to what Colorado would have charged on it. The income is taxed once, at the higher of the two rates. The credit goes on the resident state’s return, so a Colorado resident who works in Kansas files a Kansas nonresident return first, then claims the credit on Colorado’s. For a part-year resident the credit is only for income from the resident part of the year.

The credit doesn’t apply to the states with no income tax, which is most of where people move to and from: Texas, Florida, Washington, Nevada, Wyoming, South Dakota, Tennessee. There is nothing to credit; the Colorado part of the year is simply taxed and the rest isn’t.

Remote Work and the Convenience Rule

Colorado’s rule: where the work is physically done

Colorado taxes wages by where you are when you do the work. A Colorado resident working from home for a Chicago company owes Colorado on all of it and Illinois on none of it, unless you travel to Chicago, in which case those days are Illinois income. A few states (New York, Delaware, Nebraska, Pennsylvania, Connecticut and, in some situations, New Jersey) apply a “convenience of the employer” rule that taxes a remote employee as if they were in the office. Colorado does not, but if your employer is in one of those states and keeps a desk for you there, the other state may claim your wages and the Colorado credit will absorb some of it. Get the employer’s withholding set to Colorado the week you arrive; a W-2 showing a full year of another state’s withholding is a problem that takes two amended returns to fix.

Leaving Colorado

What follows you, and what doesn’t

• Pensions and PERA. Federal law (4 U.S.C. §114) forbids any state from taxing the retirement income of a nonresident. The day you become a Florida resident, your Colorado PERA pension, your IRA withdrawals and your Social Security stop being Colorado income, even though PERA is a Colorado plan. Tell PERA to stop Colorado withholding; it won’t stop on its own.
• The Colorado house. If you keep it as a rental, the rent is Colorado-source forever. If you sell it after you leave, the gain is Colorado-source, the $250,000/$500,000 federal exclusion applies to Colorado too, and the title company must withhold 2% of the sale price (or the net proceeds, if less) from a nonresident seller and send it to Colorado on Form DR 1083. You get it back on the nonresident return the following spring, which is a long time to lend Colorado 2% of a house. Selling before the move avoids the withholding.
• The TABOR refund. Colorado’s state sales-tax refund, paid through the income tax return in years when the state collects more than TABOR allows, requires a full year of Colorado residency. Leave in November and the year’s refund is gone.
• Proving you left. New license, new registration, new voter card, new mailing address, a lease or deed in the new state, and a calendar. Colorado will accept a clean move. The person it questions is the one with a Colorado license three years after “moving” to Wyoming.

I retired, moved to Arizona, and PERA kept withholding Colorado tax for eleven months because nobody told them. Colorado refunded it, eventually. I have decided not to think about what the money would have earned.

Arriving in Colorado

What to set up in the first month

• Withholding. Give your employer a new address and, if useful, Colorado’s DR 0004; most employers switch state withholding from the address alone. Check the first pay stub.
• Estimated payments. If you have retirement or investment income with no withholding, Colorado wants quarterly estimates (DR 0104EP) once the year’s Colorado tax is $1,000 or more. The federal safe harbors have a Colorado cousin, and a mid-year arrival usually has no prior-year Colorado tax to use, so the current-year 90% test is the one that applies.
• The subtractions you gain. Colorado’s pension and annuity subtraction ($20,000 at 55, $24,000 at 65, with the Social Security rules on the retirees page), the subtraction for U.S. government interest, the charitable subtraction for non-itemizers, and the 529 deduction for CollegeInvest contributions. Newcomers from high-tax states are surprised by how short the list of addbacks is: other states’ municipal bond interest, the overtime deduction, and not much else.
• Moving expenses are not deductible, federally or in Colorado, except for active-duty military under orders. That deduction ended in 2018 and the 2025 act made its absence permanent.

A Worked Example

The Other State

Colorado’s side of a move is usually the easy half. The difficulty is the state you came from, if it was California or New York, or the state you went to, if it taxes things Colorado doesn’t. California in particular treats a departure skeptically when the taxpayer keeps a California house, a California business interest, or spends significant time there, and its residency audits can reach back years. If you are leaving a high-tax state, the documentation of the move is worth doing carefully in the year of the move, not reconstructing later. The Colorado return and the other state’s part-year return should be prepared together, so the dates and the numbers agree, which is the main thing either state checks.