Colorado Tax Changes 2026: A CPA Guide | HelloBooks Colorado 2025 returns at 4.4%: the QBI addback continues, no addback for tips, and the federal overtime deduction must be added back from tax year 2026.
Colorado starts from federal taxable income, so every new federal deduction lands on the state return unless the state adds it back. For 2025 the list of addbacks grew in one place and stayed put in another.
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Income tax rate, 2025
4.4%
Applies: Tax years 2025 and 2026From IRS.gov · checked October 10, 2026
The Department’s January 2026 Individual Income Tax Guide says no Colorado addback is required for the federal qualified tips deduction. For overtime, a taxpayer who claims the deduction on Schedule 1-A must add it back on the Colorado return for tax years 2026 and later. The guide does not require that addback for 2025.
HB25B-1001, signed August 28, 2025, keeps the QBI addback in place indefinitely; it had been due to end for 2026. The guide applies it to single filers with AGI over $500,000 and joint filers over $1,000,000, and to owners of entities that made a SALT Parity election.
Hourly clients who saw a federal benefit on 2025 returns will see Colorado tax on the same pay for 2026. Mention it in your engagement letter or organizer now. Colorado penalty rules are at /us/penalties/colorado.
The plain-English summary for business owners
Schedule 1-A · qualified overtime
Schedule 1-A · qualified tips
State returns · Arizona
General information for tax professionals, not advice on a specific return. Figures are from IRS.gov on the date shown; check the current IRS instructions before filing.
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