Updated October 4, 2026. Quick answer: Yes. “Colorado income tax is based on your federal taxable income”, and the 2025 booklet says “The income tax rate is currently 4.4%.” The old capital gain subtraction now covers only gains “recognized by farmers from the sale of agricultural real property”.
Selling your home? How the state taxes the profit, from its own tax documents: Does Colorado tax the profit from selling your home?.
The same question for dividends and interest: does Colorado tax dividends and interest.
How Colorado treats capital gains
| Item | What the documents say |
|---|---|
| Treatment | Taxed as ordinary income at the flat rate |
| Rate | 4.4% (2025 individual income tax booklet) |
| Capital gain subtraction | For tax years 2022 and later, only for gains recognized by farmers on agricultural real property, limited to $100,000 (Department of Revenue topic page) |
A $50,000 long-term gain
A $50,000 long-term gain is taxed at the flat 4.4%, computed as $50,000 x 4.4% = $2,200 of Colorado tax on the gain, unless you are a farmer selling agricultural real property and meet the subtraction’s conditions.
What changes in 2026
The 2025 booklet is the latest Colorado document read, and it prints no 2026 rate.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal tax on gains in Topic no. 409, Capital Gains and Losses and Publication 550, Investment Income and Expenses.
Related: whether Colorado taxes pensions, how Colorado taxes retirement income, the capital gains tax by state table, and the federal capital gains tax calculator.
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Answer againSources
- 2025 Colorado Individual Income Tax Booklet (DR 0104): https://tax.colorado.gov/sites/tax/files/documents/Book104_2025.pdf
- Income Tax Topics: Colorado Capital Gain Subtraction: https://tax.colorado.gov/income-tax-topics-colorado-capital-gain-subtraction
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.