Updated October 4, 2026. Quick answer: Yes, with a pension subtraction. Colorado taxes withdrawals at a flat rate, and the 2025 booklet says “The income tax rate is currently 4.4%”. Its subtraction for people 65 or older is up to $24,000: the booklet says “Age 65 or older, then you may subtract $24,000”. Distributions that are early for federal purposes do not qualify.
State retirement-income forms, line by line: Colorado DR 0104AD.
Inherited an IRA? What the state’s own documents say about taxing those withdrawals: Colorado tax on inherited IRA withdrawals.
Hold a 403(b) or 457(b)? What the state’s own documents say about taxing those withdrawals: does Colorado tax 403(b) and 457(b) withdrawals.
Inheriting from, or planning for, someone in this state? Whether the state has an inheritance tax, from its own tax documents: Does Colorado have an inheritance tax?.
What Colorado does with 401(k) and IRA withdrawals
The Department’s publication says the subtraction covers “certain IRA distributions reported on line 4b of the federal return”, and that “premature distributions for federal income tax purposes do not qualify”. It adds that “The subtraction is generally allowed only to individuals age 55 or older”.
| Item | What the documents say |
|---|---|
| Treatment | Taxable, with a pension and annuity subtraction |
| Subtraction | $24,000 at 65 or older, $20,000 at 55 to 64, reduced by any Social Security subtraction; certain IRA distributions qualify |
| State rate | 4.4% flat (2025) |
| Source | Colorado Department of Revenue, 2025 DR 0104 booklet and Income Tax Topics: Social Security, Pensions and Annuities |
A $40,000 withdrawal
For a filer 65 or older with no Social Security subtraction, up to $24,000 of a $40,000 withdrawal is subtracted, leaving $16,000 (computed as $40,000 minus $24,000) in Colorado income, taxed at 4.4%.
What changes in 2026
The documents read print no 2026 rate or subtraction change.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal tax on these withdrawals in Publication 590-B, Distributions from Individual Retirement Arrangements and Publication 575, Pension and Annuity Income.
Related: whether Colorado taxes pensions, how Colorado taxes retirement income, whether Colorado taxes Roth conversions, and the state-by-state table of 401(k) and IRA withdrawal tax.
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Answer againSources
- 2025 Colorado Individual Income Tax Filing Booklet (DR 0104 Book): https://tax.colorado.gov/sites/tax/files/documents/Book104_2025.pdf
- Income Tax Topics: Social Security, Pensions and Annuities: https://tax.colorado.gov/sites/tax/files/documents/ITT_Social_Security_Pensions_and_Annuities_Jan_2025.pdf
- Individual Income Tax Frequently Asked Questions: https://tax.colorado.gov/individual-income-tax-FAQ
Sources: the primary documents linked above, read on October 4, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.