Colorado Passes Bill Lowering Income Tax Rates For 2024

At a Glance

• Effective January 1, 2024, the Colorado individual income tax rate is temporarily reduced to 4.25%.
• Rate decreases could continue annually through 2035, contingent on state revenue.

Summary

On May 14, 2024, Colorado Governor Jared Polis signed into law Senate Bill 24-228, reducing the individual income tax rate for the 2024 tax year from 4.40% to 4.25%. Possible rate reductions of 0.04% to 0.15% for future tax years will be contingent on whether the revenue for the year exceeds projections for the total amount of homestead exemption refunds issued by the state.

Next Steps

Paylocity will update the 2024 Colorado withholding rate to 4.25% to align with the new legislation. This reduction will not require adjustments to payroll withholding amounts, as the agency will refund individuals for any excess tax collected as part of their personal income tax filing for tax year 2024.

Thank you for choosing Paylocity as your Payroll Tax and HCM partner. This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney, or Advisor.