Does Colorado have an inheritance tax? As of January 2026, the clear and confirmed answer is no. Colorado does not impose a state inheritance tax on beneficiaries who receive money, property, or other assets after a person’s death. This remains unchanged and continues to be a major point of interest for families, retirees, investors, and estate planners across the United States.
Colorado is considered one of the more tax-friendly states when it comes to inheritances. Heirs are not required to pay a state-level tax simply because they receive assets from a deceased person who lived in Colorado. This applies regardless of whether the beneficiary is a spouse, child, relative, or non-relative.
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What an Inheritance Tax Really Means
An inheritance tax is a tax paid by the person who receives assets from an estate. The tax is usually calculated based on the value of the inheritance and the relationship between the deceased and the beneficiary. In states that have this tax, close family members often receive favorable treatment, while distant relatives or unrelated heirs may face higher rates.
Colorado does not use this system. When someone inherits property, cash, investments, or personal belongings from a Colorado estate, the state does not assess a percentage-based inheritance tax on the recipient. The full value passes to the heir without a Colorado inheritance tax deduction.
This policy simplifies the process for families and reduces the financial burden that often accompanies estate settlements in other states.
Does Colorado Have a State Estate Tax?
In addition to having no inheritance tax, Colorado also does not currently impose a state estate tax. An estate tax differs from an inheritance tax in that it is paid by the estate itself before any assets are distributed to beneficiaries.
For deaths occurring in Colorado, there is no state-level estate tax deducted from the total value of the estate. The personal representative or executor does not need to file a Colorado estate tax return or calculate a state estate tax bill.
This places Colorado among the majority of U.S. states that do not collect taxes at death, either from the estate or from the heirs.
Historical Background of Colorado’s Death Taxes
Colorado did once have laws related to inheritance and estate taxation. Earlier in the twentieth century, the state collected taxes tied to the transfer of wealth at death. These laws were later replaced by an estate tax system that was linked to federal tax credits.
When federal law eliminated the mechanism that allowed states to collect these linked taxes, Colorado’s estate tax effectively disappeared. The state has not reinstated a separate inheritance tax or estate tax since then.
As of January 2026, there is no legislation in effect that would reintroduce either tax in Colorado.
Federal Estate Tax and Colorado Residents
While Colorado has no inheritance tax, large estates may still be subject to the federal estate tax. This is a national tax imposed on very high-value estates before assets are distributed to heirs.
Key points for Colorado residents include:
- The federal estate tax applies only to estates above a high exemption threshold.
- The tax is paid by the estate, not by individual beneficiaries.
- Heirs in Colorado do not pay a separate state inheritance tax even if federal estate tax is owed.
Most estates do not reach the federal threshold and therefore owe no federal estate tax. However, the absence of a Colorado inheritance tax means beneficiaries do not face an additional layer of taxation at the state level.
What Beneficiaries in Colorado Can Expect
If you inherit assets from someone who lived in Colorado, your experience is generally straightforward from a state tax perspective.
You can expect:
- No Colorado inheritance tax bill.
- No percentage withheld by the state from your inherited amount.
- No special inheritance tax filing requirement with Colorado tax authorities.
You may still encounter other financial considerations, such as income tax on retirement account withdrawals or capital gains tax if you later sell inherited property. These are not inheritance taxes, but normal income or investment taxes that apply after the inheritance is received.
Does Relationship to the Deceased Matter in Colorado?
In states with inheritance taxes, the relationship between the deceased and the beneficiary often affects the tax rate. Spouses may pay nothing, children may pay reduced rates, and unrelated heirs may pay the highest rates.
In Colorado, relationship does not affect inheritance taxation because the tax itself does not exist. Whether you are a spouse, child, sibling, friend, or charity, Colorado does not impose an inheritance tax on what you receive.
This uniform treatment simplifies estate planning and removes uncertainty for non-family beneficiaries.
Inherited Property Located Outside Colorado
While Colorado does not tax inheritances, complications can arise if the deceased owned property in another state that does impose an inheritance or estate tax.
For example:
- Real estate located in a state with an inheritance tax may be subject to that state’s rules.
- The beneficiary may owe taxes to the state where the property is located, not to Colorado.
The key factor is the location of the property and the tax laws of that jurisdiction, not the residence of the beneficiary.
Why the Question “Does Colorado Have an Inheritance Tax” Matters in 2026
With an aging population and continued migration to Colorado, estate planning questions are more relevant than ever. People relocating from states with inheritance taxes often want to know whether their heirs will face similar obligations in Colorado.
As of January 2026, the answer remains stable and clear:
- Colorado does not tax inheritances.
- Colorado does not tax estates at the state level.
- Beneficiaries keep the full value of what they inherit, subject only to federal rules and standard income tax laws that apply after distribution.
This makes Colorado attractive for retirees, high-net-worth individuals, and families who want to minimize state-level tax exposure at death.
Common Misconceptions About Inheritance Taxes in Colorado
Many people confuse inheritance tax with other types of taxes. Some of the most frequent misunderstandings include:
- Believing that property taxes increase automatically after inheritance.
- Assuming that large inheritances always trigger a special state tax.
- Confusing probate fees with inheritance taxes.
In Colorado, probate costs, legal fees, and court filing expenses may apply, but these are not taxes. They are administrative costs associated with settling an estate.
How Inherited Assets Are Typically Taxed After Transfer
Even without an inheritance tax, certain tax rules can still apply after assets are received:
- Retirement accounts: Withdrawals are usually taxed as income.
- Investment accounts: Selling inherited investments may trigger capital gains tax.
- Rental property: Ongoing rental income is taxable.
These taxes are not based on the act of inheriting itself but on how the assets are used or sold afterward.
Estate Planning Advantages in a No-Inheritance-Tax State
Living in a state without an inheritance tax offers several planning benefits:
- Greater flexibility in naming beneficiaries.
- No need to structure gifts solely to avoid state inheritance taxes.
- Simpler calculations when estimating what heirs will actually receive.
For families with complex estates, the absence of a Colorado inheritance tax reduces planning complexity and compliance costs.
Potential Legislative Changes and Current Status
As of January 2026, there is no active, enacted law in Colorado that would impose an inheritance tax. While tax policy is always subject to political debate, no inheritance tax is in effect, and none has been implemented.
Anyone concerned about future changes should monitor state legislation, but current planning can rely on the fact that Colorado does not tax inheritances.
Does Colorado Have an Inheritance Tax for Trusts?
Trust distributions are treated the same way as other inheritances in Colorado. The state does not impose an inheritance tax on assets distributed from a trust to beneficiaries.
However, trust income may be subject to income tax depending on how and when it is distributed. Again, this is income tax, not inheritance tax.
Key Takeaways for 2026
- Colorado does not have an inheritance tax.
- Colorado does not have a state estate tax.
- Beneficiaries are not taxed by the state for receiving inheritances.
- Federal estate tax may apply to very large estates.
- Normal income and capital gains taxes may apply after assets are received and used or sold.
Does Colorado have an inheritance tax? The answer in January 2026 is still no, and that clarity continues to make the state a favorable place for families planning for the future.
