Updated October 4, 2026. Quick answer: Partly, and the age at the end of the tax year decides. The Department of Revenue says “Retired servicemembers under 55 years of age” may subtract up to $15,000 of military retirement benefits; at 55 or older the regular pension and annuity subtraction applies, generally $20,000 or $24,000 at 65 or older.
How Colorado treats military retired pay
| Item | What the documents say |
|---|---|
| Treatment | Subtraction from federal taxable income; the limit depends on age at the end of the tax year |
| Under 55 | Up to $15,000 military retirement subtraction (tax years 2022 through 2028) |
| 55 or older | The regular pension and annuity subtraction, generally limited to $20,000 each year, or $24,000 at age 65 or older |
| Joint filers | The pension and annuity subtraction is allowed separately to each taxpayer on the return |
A $30,000 example
Age 50, $30,000 of retired pay: $30,000 minus $15,000 = $15,000 is left in Colorado income.
Age 58: $30,000 minus $20,000 = $10,000 is left. Age 66: $30,000 minus $24,000 = $6,000 is left. The pension and annuity subtraction covers all pension income together, so other pension income uses up the same cap.
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What changes in 2026
The Department table prints a $15,000 limit for tax years 2026, 2027 and 2028 (no change from 2022); no other 2026 change is printed in the documents read.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Publication 3, Armed Forces’ Tax Guide.
Related: whether Colorado taxes pensions, how Colorado taxes retirement income, military retirement pay by state, and the military retirement calculator.
Sources
- Income Tax Topics: Military Servicemembers (Revised February 2025): https://tax.colorado.gov/sites/tax/files/documents/ITT_Military_Servicemembers_Feb_2025.pdf
- Retired Servicemembers: https://tax.colorado.gov/retired-servicemembers
- Income Tax Topics: Social Security, Pensions and Annuities: https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities
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.