Capital gains tax in Colorado (2026): selling a business, real estate or farm

The Colorado capital gain subtraction is nearly gone

Older articles still describe a Colorado break of up to $100,000 for long-held property. For tax years 2022 and later, the Department of Revenue limits it to capital gains recognized by farmers who must file federal Schedule F, on real property classified as agricultural land, located in Colorado, acquired on or after May 9, 1994 but before June 4, 2009, and owned at least five uninterrupted years (CDOR Colorado Capital Gain Subtraction publication, citing C.R.S. 39-22-518). The cap is the lesser of the qualifying gain, the net capital gain on Schedule D, or $100,000 per taxpayer. Recapture never qualifies, and the claim needs form DR 1316.

For a rancher who bought in 2003, that is worth at most $4,400 at the 2026 rate of 4.4%. For a business owner, landlord or investor it is worth nothing. Federal tax runs 0%, 15% or 20% on long-term gain in 2026 under Rev. Proc. 2025-32; see the federal capital gains guide.

Worked examples: rental, stock, a move, and the 0% bracket

• Rental building: a $2,000,000 gain with $500,000 of unrecaptured Section 1250 gain adds $88,000 of Colorado tax and $598,353 in total. Colorado does not care which part is recapture; it is all 4.4% in 2026.
• Company stock: the same couple selling stock for a $2,000,000 gain owes $88,000 to Colorado and $559,065 overall.
• After a move to Wyoming: the stock sale costs $471,065, so Colorado's share is $88,000. That only works for stock and similar intangibles, and only if the move comes first.
• The 0% surprise: retirees with $30,000 of other income and a $90,000 land gain owe $0 federally but $3,960 to Colorado, because Colorado starts from federal taxable income and has no 0% bracket.

Colorado follows deferred gain wherever you go

Colorado's residency regulation (1 CCR 201-2, Rule 39-22-109) is unusually explicit. Gain from Colorado real property is Colorado-source, and deferred recognition does not change that: installment sales, exchanges and transfers stay Colorado-source when the gain is finally recognized. Its own example: a nonresident trades Colorado property for Texas property in a 1031 exchange, sells the Texas property the next year, and the appreciation from the Colorado years is Colorado-source. The seller keeps Colorado nexus as long as the gain is deferred.

Two more rules in the same regulation matter at a sale. Interest from an installment sale of Colorado real or tangible personal property is Colorado-source, so a seller who carries a note and moves to Arizona still reports the interest to Colorado. And tangible property that appreciates in Colorado but is moved out to be sold produces Colorado-source gain: hauling ranch equipment or a collection to Nevada before the auction does not escape the tax.

Selling as a nonresident: DR 1083 withholding

When a nonresident sells Colorado real property for more than $100,000, the title company withholds the lesser of 2% of the sales price or the net proceeds and remits it with form DR 1079, using DR 1083 (2025 version). Exemptions include sales of $100,000 or less, a transferor's principal residence that qualifies under Section 121, and transactions with no net proceeds. The withholding is a prepayment, not the tax; the nonresident files a Colorado return and either owes more or gets a refund. On a seller-financed sale, plan with the title company for how the 2% applies when cash at closing is only the down payment. See the installment sale analysis for note terms that protect the seller.

Rates under TABOR

Colorado's flat rate is 4.4% for 2026 on the Department's estimated tax form (DR 0104EP). The Taxpayer's Bill of Rights can trigger a temporary cut when state revenue exceeds its limit, so the final 2026 rate is known only after the fiscal-year revenue figures. Plan on 4.4%; treat any cut as a bonus. Because the rate is flat, an installment sale does not lower the Colorado rate the way it can in bracket states, though it still spreads the tax and can lower federal brackets and NIIT exposure. Compare the timing levers in year-end timing.

Farm and ranch sellers

Colorado ranches are where the remaining subtraction lives. Qualifying gain must come from Colorado agricultural land, the seller must be filing Schedule F that year, and pass-through owners must have held their interest for five years as well as the entity holding the land five years (CDOR publication). An installment sale qualifies only if the five-year hold was met before the sale date. A package sale qualifies only if at least 75% of the real property is classified agricultural. For the federal side of a ranch sale (Section 1231 land, raised livestock, equipment recapture), see capital gains tax on farmland.

Closing costs and the estate side

Colorado's state documentary fee is 1 cent per $100 of consideration on deeds over $500 (Boulder County Clerk and Recorder fee schedule), so $500 on a $5,000,000 sale; Colorado has no transfer tax in the California or Washington sense, though a few home-rule towns charge their own. Colorado has no estate or inheritance tax, so the federal step-up at death is the main estate lever for owners who might hold. Compare neighbors on the capital gains tax by state table, including Wyoming and Arizona. To compare a cash sale, a note, a 1031 and a move with your own numbers, get the Big Sale Tax Analysis.

Run your own numbers

Frequently asked questions