Active-duty pay
Taxed
Active-duty pay taxable to CO residents.
State Guide · CO
Colorado — Military Tax Treatment
Colorado taxes active duty and Guard pay and only partially exempts retirement. The subtraction amounts ($20K/$24K) are not indexed to inflation, so they represent a shrinking fraction of typical retirement pay over time.
Tax treatment at a glance
Guard & Reserve drill pay
Taxed
Guard and Reserve drill pay is taxable Colorado income. SCRA protections apply during federal activation but not routine drill.
Military retirement pay
Partially Exempt
Subtraction allowed: up to $20,000 if under 65, $24,000 if 65+.
The numbers · verified for tax year 2025
Top marginal rate
4.40%
Retirement-pay exemption
Up to $15,000 · age 55+
Retirees under age 55 may subtract up to $15,000 of military retirement pay (military-specific subtraction, in effect through 2028); retirees 55+ instead use the regular pension subtraction, capped at $20,000 (ages 55–64) or $24,000 (age 65+). SB25-136 removes these caps beginning 2026.
Standard deduction
Colorado is a flat 4.40% for 2025 and has no separate state standard deduction (it starts from federal taxable income).
VA disability compensation
Always tax-free
Federally tax-free under 38 USC § 5301. No state taxes VA disability compensation as income — Colorado included.
Survivor Benefit Plan (SBP)
Follows retirement
SBP annuities likely qualify for the retirement income subtraction — verify with Colorado DoR as the rules apply to pension income broadly.
Federal rules that override state law
SCRA — Servicemembers Civil Relief Act
Active-duty servicemembers pay state income tax only to their state of legal domicile — not the state where they are stationed. If you are from Texas and stationed in Colorado, Colorado cannot tax your military pay. This applies during all active duty periods and during Guard/Reserve mobilizations on federal (Title 10) orders.
MSRRA — Military Spouses Residency Relief Act
Military spouses can maintain their home-state domicile even when living in a different state due to their servicemember's orders. A spouse who is a Texas resident following their servicemember to Colorado can keep Texas as their tax domicile and avoid Colorado state income tax on their wages.
Guard & Reserve — the SCRA gap
SCRA pay protections apply during federal (Title 10) activation orders. During routine drill weekends and state-only activations, Guard and Reserve members are state residents serving in their home state — SCRA does not protect their drill pay from state income tax. Whether Colorado exempts that pay is the state-specific question answered above.
Filing watch-outs
- 01Claim the retirement subtraction using Colorado Form 104, Schedule A, line for military retirement
- 02The subtraction is for pension income broadly — other pension income competes for the same cap
Veteran-specific tax benefits
Disabled veteran property tax exemption.
Official authority
https://tax.colorado.gov/ ↗State tax law changes annually. Verify current rules with the Colorado Department of Revenue before making any tax decision.
Colorado military tax — common questions
Does Colorado tax military retirement pay in 2026?
Colorado partially taxes military retirement pay. Subtraction allowed: up to $20,000 if under 65, $24,000 if 65+.
Does Colorado tax active-duty military pay?
Colorado taxes active-duty military pay for state residents. Active-duty pay taxable to CO residents. Under the SCRA, Colorado can only tax the military pay of service members who are legally domiciled in Colorado — not those merely stationed there.
Does Colorado tax National Guard and Reserve drill pay?
Colorado taxes Guard and Reserve drill pay. Guard and Reserve drill pay is taxable Colorado income. SCRA protections apply during federal activation but not routine drill.
Is VA disability compensation taxed in Colorado?
No. VA disability compensation is federally tax-free under 38 U.S.C. § 5301, and no state — including Colorado — taxes it as income.
If I'm stationed in Colorado but claim another state, can Colorado tax my military pay?
No. Under the Servicemembers Civil Relief Act (SCRA), active-duty pay is taxable only by your state of legal domicile, not the state where you are stationed. If your domicile is elsewhere, Colorado cannot tax your active-duty military pay. Military spouses get the same protection under the MSRRA.
Related tools
Other state guides