Retiring in Colorado Springs
Colorado offers real, recently expanded retiree tax advantages -- as of tax years beginning January 1, 2026, Colorado removed all caps on its pension and annuity income subtraction for anyone 55 or older, per SB25-136 -- layered on top of Colorado Springs' genuinely large military-retiree community and real senior property-tax relief, though a retiree should weigh those advantages against real wildfire/hail insurance costs and the flat 4.4% state income tax that still applies above the exclusion.
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Learn moreColorado's Pension and Annuity Subtraction: Real, and Recently Uncapped
For tax years beginning before 2026, Colorado allowed a pension and annuity subtraction of up to $24,000 for taxpayers 65 and older and up to $20,000 for those 55 to 64, with the two subtractions (Social Security and other pension/annuity income) not stacking. SB25-136, per the Colorado General Assembly's own bill tracking, removes these caps entirely for tax years beginning on or after January 1, 2026: any individual 55 or older may now subtract the full amount of pension or annuity income -- defined broadly to include employer pensions, military retirement, IRA/retirement-plan withdrawals, Social Security, and disability/death benefits -- from their federal taxable income when calculating Colorado state taxable income. This is a real, recently enacted, and substantial expansion, not a proposal still pending.
An Earlier, Income-Limited Version Also Applies to Some Under-65 Retirees
Beginning with tax year 2025, the full Social-Security-specific subtraction also extends to taxpayers 55-64 with adjusted gross income at or below $75,000 (single) or $95,000 (joint) -- a real, if income-limited, benefit for near-retirement-age Coloradans that predates the broader 2026 uncapping described above.
How This Interacts With Colorado's Flat 4.4% Income Tax
Retirement income above whatever subtraction applies is taxed at Colorado's flat 4.4% rate for 2026 (see the taxes topic page for the full rate detail). For a retiree whose retirement income falls entirely within the now-uncapped pension/annuity subtraction (age 55+, tax years 2026 and beyond), this means effectively no Colorado state income tax on that income at all -- a genuinely strong, structural, and very recently expanded advantage.
Senior Property Tax Relief and a Genuinely Large Military-Retiree Community
As detailed on the property-taxes and buying-a-home topic pages, Colorado's statewide Senior Property Tax Exemption (50% of the first $200,000 in value, for owner-occupants 65+ with 10+ years of ownership/occupancy) was reinstated with funding for tax year 2026, though its funding has not been guaranteed in every past year -- confirm current status with the El Paso County Assessor. Separately, Colorado Springs' genuinely large, multi-installation military concentration supports a real military-retiree community and associated infrastructure, consistent with the MILITARY_RETIREES entry in the base Colorado Springs record's bestFor list.
Weigh the Real Insurance-Cost Trade-off
The honest counterweight: Colorado Springs' homeowners insurance costs, cited this session at roughly $4,476-$5,424/year for standard coverage, run well above the national average due to real, documented wildfire and hail exposure (see the homeowners-insurance and flood-hurricane-risk topic pages) -- a real, ongoing cost a retiree on a fixed income should factor in alongside the genuine income-tax advantages described above.
Key takeaways
- Colorado removed all caps on its pension/annuity income subtraction for anyone 55+ starting with tax years beginning January 1, 2026 (SB25-136) -- a real, recently enacted, substantial expansion from the prior $20,000/$24,000 caps, not a pending proposal.
- A separate, income-limited Social Security subtraction has applied to some 55-64-year-olds (AGI at or below $75,000 single / $95,000 joint) since tax year 2025, predating the broader 2026 uncapping.
- Retirement income above the applicable subtraction is taxed at Colorado's flat 4.4% rate (2026) -- a retiree whose retirement income falls entirely within the now-uncapped subtraction pays effectively no Colorado state income tax on it.
- Colorado's statewide Senior Property Tax Exemption (reinstated with funding for tax year 2026) and Colorado Springs' genuinely large military-retiree community add further, real retiree-specific advantages -- though senior-exemption funding should be confirmed directly given its inconsistent history.
- Real wildfire/hail-driven homeowners insurance costs (roughly $4,476-$5,424/year cited this session) are a genuine counterweight for a retiree on a fixed income.
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