Updated October 5, 2026. Quick answer: Yes, with a subtraction. Colorado’s flat rate is 4.4% for 2025, and the Department says the pension and annuity subtraction “is generally allowed only to individuals age 55 or older”. It is generally capped at $20,000 a year, or $24,000 at 65 or older.
State retirement-income forms, line by line: Colorado DR 0104AD.
How Colorado treats annuity income
| Item | What the documents say |
|---|---|
| Treatment | Taxed at the flat rate; a pension and annuity subtraction applies from age 55 |
| 2025 rate | 4.4% (the Department’s guide prints 4.25% for 2024) |
| Subtraction | Generally $20,000 a year, or $24,000 for individuals 65 or older, allowed separately to each joint filer |
| Purchased annuities | “Amounts received from privately purchased annuities that have fully matured also qualify” |
| Not matured | The Department’s page does not say how an annuity that has not fully matured is treated |
A $24,000 example
A filer 65 or older with $24,000 of annuity payments and no other pension income can subtract up to $24,000, so the whole amount comes out and it adds $0 of Colorado tax.
A filer from 55 to 64 can subtract up to $20,000, leaving $4,000, computed as ($24,000 minus $20,000) x 4.4% = $176.
A filer under 55 gets no subtraction on a living annuitant’s payments, computed as $24,000 x 4.4% = $1,056.
What changes in 2026
The latest documents read print no 2026 change to the way annuity income is taxed.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Topic no. 410, Pensions and Annuities and Publication 575, Pension and Annuity Income.
Related: whether Colorado taxes pensions, how Colorado taxes retirement income, state tax on 401(k) and IRA withdrawals, how a surrendered annuity is taxed, and pension and annuity decisions.
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Answer againSources
- Income Tax Topics: Social Security, Pensions and Annuities (Colorado Department of Revenue: Taxation): https://tax.colorado.gov/income-tax-topics-social-security-pensions-and-annuities
- Individual Income Tax Guide (Colorado Department of Revenue: Taxation): https://tax.colorado.gov/individual-income-tax-guide
Sources: the primary documents linked above, read on October 5, 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.