Colorado Payroll Tax Guide (2026)
Colorado withholds a flat 4.40% income tax, charges unemployment premiums on the first $30,600 of each worker’s pay for 2026, up from $27,200, splits a 0.88% FAMLI paid leave premium evenly with employees, and adds Denver’s monthly occupational privilege tax on top.[4]
Colorado payroll at a glance
Colorado layers three state level payroll taxes on employers: income tax withholding taken from employees, unemployment insurance premiums paid entirely by employers, and FAMLI paid family leave premiums split evenly between the two.[4]
What changed for Colorado payroll in 2026
Six items moved for Colorado employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.
2026 Colorado payroll tax calculator
Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.
Employer pays
Withheld from the employee
State income tax withholding is not included above: it depends on the employee’s IRS Form W-4, optionally supplemented by Colorado Form DR 0004 and filing status, so it cannot be estimated from gross pay alone.
Payroll tax rates & the nexus question
Colorado runs 6 state payroll taxes. The table below is the whole state layer for 2026.[4]
The state payroll taxes
| Tax | Paid by | 2026 rate | Wage base |
|---|---|---|---|
| UI | Employer | 0.56%–7.34%; 3.05% new | $30,600 |
| Support surcharge | Employer | 0.06% to 0.81% | $30,600 |
| Solvency surcharge | Employer | 0.10% to 2.70% | $30,600 |
| FAMLI employer premium | Employer | 0.44% | $184,500 |
| FAMLI paid family and medical leave employee premium | Employee | 0.44% | $184,500 |
| Income tax withholding | Employee | 4.40% flat | No limit |
The 0.006 to 0.008 rate schedule applies for 2026. The solvency surcharge stays in effect because the 2025 trust fund reserve ratio was 0.649%, below the 0.7% trigger. A combined rate on the Rate Notice is the base rate plus the support rate plus the solvency surcharge.[4]
Who has to register
Paying at least $1,500 in wages in a calendar quarter, or employing at least one person for any part of a day in 20 different weeks, in the current or preceding calendar year. Domestic, agricultural and nonprofit employers follow separate thresholds.[4] Income tax withholding is administered separately by Colorado Department of Revenue, Taxation Division, so most employers end up with two state account numbers, not one.
Multistate and remote employees
When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.
- 1. Localisation of service→
- 2. Base of operations→
- 3. Place of direction & control→
- 4. Employee’s residence
One remote employee is usually enough. A single person working from home in Colorado generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.
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Ask a Payroll SpecialistRegistration & return filing
Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.[4]
How to register
- Cross the wage threshold→
- MyUI Employer+→
- Receive account number→
- Annual Rate Notice, mailed each December for the coming calendar year→
- File & deposit online
Paying at least $1,500 in wages in a calendar quarter, or employing at least one person for any part of a day in 20 different weeks, in the current or preceding calendar year. Domestic, agricultural and nonprofit employers follow separate thresholds.[4]
Deposit schedule
Set by annual withholding liability: quarterly under $7,000, monthly from $7,000 through $50,000, and weekly at $50,000 or more.[1]
Returns, reports & due dates
| Form | What it is | Due |
|---|---|---|
| Quarterly wage detail report filed electronically in MyUI Employer+ | Quarterly unemployment return | April 30, July 31, October 31, January 31 |
| Form DR 1094 for periodic wage withholding returns and Form DR 1093 as the annual… | Income tax withholding returns | Set by annual withholding liability: quarterly under $7,000, month |
| Annual reconciliation | Year-end withholding reconciliation | January 31 |
| Form 941 | Federal quarterly return | Last day of the month after quarter end |
| Form 940 | Federal unemployment, annual | January 31 |
| New hire report | Report of newly hired employees | Within 20 days of start date |
Quarterly unemployment returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.[4]
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Subject wages vs. exempt payments
Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.[4]
Subject wages
- Salaries, hourly pay, overtime and piece rates
- Commissions, bonuses and incentive pay
- Most cash tips reported by the employee
- Vacation, holiday and paid sick leave when taken as wages
- Severance and payments in lieu of notice
- The cash value of meals and lodging provided as compensation
- Employer contributions to a non-qualified deferred compensation plan
- Wages subject to the employee-paid contributions listed above
Not subject
- Reimbursements of genuine business expenses under an accountable plan
- Employer contributions to a qualified retirement plan
- Employer-paid premiums for accident and health insurance
- Most third-party sick pay after the sixth calendar month
- Payments to a genuine independent contractor
- Workers compensation benefits
The wage base is per employer, per year, not per job. If you hire someone in August who already earned $30,600 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.
Glossary of key terms
- Taxable wage base
- The slice of each employee’s annual pay that unemployment tax is calculated on. In Colorado that is $30,600 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
- FAMLI paid family and medical leave employee premium
- An employee-funded contribution withheld from pay at 0.44%. It is the employee’s money, so it is withheld rather than paid by the employer, but the employer is responsible for remitting it.
- Experience rating
- The method Colorado Department of Labor and Employment, Division of Unemployment Insurance uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
- New employer rate
- The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
- IRS Form W-4, optionally supplemented by Colorado Form DR 0004
- The state withholding certificate. It sets how much income tax comes out of each cheque and is filed with the employer, not with Colorado Department of Revenue, Taxation Division.
- Reserve account
- The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
- Successor employer
- A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
- Localisation of service
- The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
- FUTA credit reduction
- A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
- Supplemental wages
- Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.
- Local withholding
- Income or occupational tax levied by a city, county or school district and withheld by the employer alongside state tax. It is assessed separately from the state layer.
Colorado payroll tax, layer by layer
Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.
Layer 1: Federal
| Tax | Rate | 2026 base |
|---|---|---|
| Social Security | 6.2% each side | $184,500 |
| Medicare | 1.45% each side | No limit |
| Additional Medicare | 0.9% employee only | Over $200,000 |
| FUTA, standard | 0.6% net | $7,000 |
| Federal income tax | Per Form W-4 | No limit |
Colorado has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.[7]
Layer 2: State
| Tax | Rate | 2026 base |
|---|---|---|
| UI, new employer | 3.05% | $30,600 |
| UI, experienced | 0.56%–7.34% | $30,600 |
| Support surcharge | 0.06% to 0.81% | $30,600 |
| Solvency surcharge | 0.10% to 2.70% | $30,600 |
| FAMLI employer premium | 0.44% | $184,500 |
| FAMLI paid family and medical leave employee premium, employee | 0.44% | $184,500 |
| Income tax, standard | 4.40% flat | No limit |
Layer 3, county & city: a real third layer
Colorado has no local income tax, but several cities levy a monthly occupational privilege tax on people who work there. Denver charges the employee $5.75 a month once that person earns at least $500 in a calendar month from Denver work, and charges the employer $4.00 a month for each taxable employee plus $4.00 for each owner, partner or manager doing business in Denver.[11]
The state minimum wage is $15.16 an hour, effective 2026-01-01. The tipped cash wage is $12.14. The highest is Denver at $19.29. Local rates override the state figure for hours worked in that jurisdiction. Denver is $19.29 an hour for 2026 with $16.27 for tipped food and beverage workers who make at least $3.02 in tips. Unincorporated Boulder County is $16.82 with a $13.80 tipped rate. Other Colorado municipalities have adopted their own ordinances. Adjusted for inflation each January 1 under the COMPS Order; the 2027 figure was not published by CDLE as of the access date.[10]
Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $57,784 a year ($1,111.23 a week) Colorado COMPS Order salary threshold, which runs above the federal FLSA level, and only if the duties test is also met. Paying a salary is not by itself enough.[10]
Colorado payroll FAQs
Colorado uses a flat 4.40% rate for 2026. Withholding is computed through the DR 1098 worksheet rather than as a straight percentage of gross pay, using a standard annual allowance of $11,000 for married filing jointly and $5,500 for everyone else. Employees complete IRS Form W-4 and may also file Colorado Form DR 0004 to adjust the result.
Employers with nine or fewer employees owe no employer share, but they must still withhold and remit 0.44% of employee wages each quarter. Employers with 10 or more pay the full 0.88% and may deduct half of it from employees. Confirm your headcount with the FAMLI Division by February 28, 2026, or you will be billed at the full 0.88% regardless of actual size.
The chargeable wage base rose from $27,200 to $30,600 on January 1, 2026. The solvency surcharge also stays in effect because the 2025 reserve ratio of 0.649% was below the 0.7% trigger. Employers sit on the 0.006 to 0.008 rate schedule, and each employer’s combined rate arrives in an Annual Rate Notice mailed in December.
New employers get an introductory rate keyed to their industry. For 2026 most employers pay a combined 3.05%, made up of a 1.53% base rate, a 0.17% support rate and a 1.35% solvency surcharge. Heavy construction starts at 6.285% and political subdivisions at 0.20%.
Whichever is higher for the hours actually worked in that jurisdiction. The Colorado minimum wage is $15.16 for 2026 with a $12.14 tipped cash wage, while Denver requires $19.29 an hour and $16.27 for tipped food and beverage workers. Unincorporated Boulder County sets its own rate at $16.82 with a $13.80 tipped rate.
Your frequency follows annual withholding liability: quarterly under $7,000, monthly from $7,000 through $50,000, and weekly at $50,000 or more. Periodic returns use Form DR 1094. The annual transmittal is Form DR 1093, due with W-2s by January 31 of the following year.
$30,600 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.
$15.16 an hour. No local ordinance sets a higher rate. The tipped cash wage is $12.14.
April 30, July 31, October 31, January 31. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.
Sources & methodology
- Colorado Department of Revenue, Taxation Division – Colorado Income Tax Withholding Tables for Employers (Wage Withholding Tax Guide, January 2026)
- Colorado Department of Revenue, Taxation Division – DR 1098 Colorado Withholding Worksheet for Employers (rev. 10/21/25)
- Colorado Department of Revenue, Taxation Division – Withholding Tax Guide
- Colorado Department of Labor and Employment – Unemployment Insurance Premium Rates
- Colorado Department of Labor and Employment – Introductory Rates
- Colorado Department of Labor and Employment – UI Premiums and Report Wages FAQ
- U.S. Department of Labor, Employment and Training Administration – FUTA Credit Reductions
- Colorado FAMLI Division – Employers: Family and Medical Leave Insurance (FAMLI)
- Colorado FAMLI Division – Update Your Employee Headcount for 2026 Premiums
- Colorado Department of Labor and Employment – INFO #1: 2026 COMPS and PAYCALC Orders (12.18.25)
- City and County of Denver, Department of Finance – Denver Tax Guide Topic 61: Occupational Privilege Taxes (OPT or Head Tax)
- City and County of Denver, Department of Finance – Denver Local Minimum Wage Adjusts to $19.29 per Hour for 2026
- Boulder County, Colorado – Local Minimum Wage
- U.S. Department of Labor, Wage and Hour Division – Minimum Wages for Tipped Employees
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