Updated October 5, 2026. Quick answer: Yes. Colorado starts from federal taxable income and taxes it at one flat rate: “The income tax rate is currently 4.4%.” Interest on U.S. government obligations is subtracted, and interest on other states’ bonds is added back.
How Colorado treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Taxed at the flat rate |
| 2025 rate | 4.4%, which the booklet prints in its tax table title: “2025 Colorado Income Tax Table with tax rate of 4.4%” |
| Starting point | “Colorado income tax is based on your federal taxable income,” |
| Other states’ bonds | Interest from bonds issued by any state or political subdivision is added back, but the booklet says “not bonds issued by the State of Colorado or its political subdivisions” on or after May 1, 1980 |
| U.S. obligations | Subtract “the sum of all interest earned from U.S. government bonds, treasury bills” and similar obligations on the DR 0104AD schedule, line 2 |
| Fannie Mae and Ginnie Mae | Interest from these is not part of the subtraction |
| Mutual funds | “Dividends from mutual funds may not be 100% exempt.” |
A $20,000 example
Taxable dividends and interest of $20,000 add $20,000 x 4.4% = $880 of Colorado tax, before any subtraction. Interest from a U.S. Treasury bill is subtracted first.
What changes in 2026
The latest documents read print no 2026 change to the way dividends and interest are taxed.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether Colorado taxes capital gains, whether Colorado taxes pensions, how Colorado taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- 2025 Colorado Individual Income Tax Booklet (Book 104): https://tax.colorado.gov/sites/tax/files/documents/Book104_2025.pdf
- 2025 DR 0104AD Subtractions from Income Schedule: https://tax.colorado.gov/sites/tax/files/documents/DR0104AD_2025.pdf
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.