Colorado 2026 Tax Changes: A Guide for Douglas County High Earners & Retirees

Several Colorado tax changes take effect for the 2026 tax year—and a few of them land squarely on Douglas County households. If you earn over $300,000, a voter-approved measure just sharply reduced your state deductions. If you are retired or nearing retirement, the treatment of Social Security and pension income is shifting in your favor. Here is what changed and what it means for your plan.

Proposition MM: Higher Taxes on $300,000+ Earners

In November 2025, Colorado voters approved Proposition MM by roughly 60% to 40%. Beginning with the 2026 tax year, it caps the state itemized or standard income tax deduction at just $1,000 for single filers and $2,000 for joint filers who have federal taxable income of $300,000 or more.

This is the second cut in a few years. The progression for high earners looks like this:

• Before Proposition FF (2022): deductions capped at $30,000 (single) / $60,000 (joint).
• After Proposition FF: capped at $12,000 (single) / $16,000 (joint).
• After Proposition MM (2026): capped at $1,000 (single) / $2,000 (joint).

Nonpartisan legislative staff estimated the average affected single filer would owe about $327 more and the average joint filer about $574 more. The revenue—roughly $95 million a year—funds the Healthy School Meals for All program and SNAP. A companion measure, Proposition LL, also passed and lets the state keep revenue already collected for that program.

For high-income households in Castle Pines, Lone Tree, and the rest of Douglas County, this reinforces the value of other Colorado-legal tax moves: maximizing pre-tax retirement contributions, being deliberate about the timing of income and capital gains, and using charitable strategies where they fit.

Colorado's 2026 Income Tax Rate

Colorado's permanent flat income tax rate is 4.4%. For the 2025 tax year, a TABOR surplus temporarily lowered it to 4.25%. Whether 2026 earns its own temporary reduction depends on year-end state revenue and will not be known until after the fact, so plan around the 4.4% base rate rather than assuming a cut.

Better News for Retirees: Social Security & Pension Income

Colorado has been steadily improving how it taxes retirement income—good news for the county's large population of retirees and pre-retirees, including many PERA participants in Highlands Ranch.

• Social Security, age 65+: residents 65 and older can subtract 100% of their taxable Social Security benefits from Colorado taxable income.
• Social Security, ages 55–64: more recently, residents in this age band can also deduct 100% of taxable Social Security if their income is under $75,000 (single) or $95,000 (joint).
• Pension & annuity subtraction: Colorado allows a subtraction for pension, annuity, IRA, and 401(k) income (historically capped at $20,000 for ages 55–64 and $24,000 for 65+). A 2025 law, SB25-136, changes that subtraction beginning in 2026.

Because the state has been updating its published guidance to reflect SB25-136, do not rely on old numbers—confirm the exact current pension/annuity subtraction limits with a tax professional before filing. The direction, though, is clearly toward more favorable treatment of retirement income for Colorado retirees.

What Douglas County Households Should Do

• High earners ($300k+): revisit your Colorado tax plan now that deductions are effectively gone at the state level. Timing of income, retirement-plan contributions, and charitable giving matter more.
• Retirees & pre-retirees: make sure your return actually captures the Social Security and pension subtractions you are entitled to—these are commonly missed.
• Everyone: coordinate the state picture with your federal plan, since the two interact.

These are exactly the questions a local fiduciary advisor can help you work through. Connect with a Castle Rock wealth management advisor or a planner in your part of Douglas County.

This guide is general educational information, not tax advice. Confirm current figures with a qualified tax professional or the Colorado Department of Revenue. Sources: Colorado Secretary of State (2025 ballot text), Colorado General Assembly (Proposition MM / SB25-136), and the Colorado Department of Revenue.