Do You Need to File a Colorado Nonresident Tax Return?

If you earned income from a Colorado source and you were required to file a federal income tax return for the same year, you must file a Colorado nonresident tax return. The form is the same DR 0104 that residents use, but you attach the Part-Year Resident/Nonresident Tax Calculation Schedule (DR 0104PN) so that Colorado’s flat 4.4% rate applies only to the portion of your income tied to the state.¹²

When You Have to File

Two things have to be true. You had taxable income from Colorado sources during the year, and you were required to file a federal return.¹ Colorado sets no separate dollar threshold of its own. If your Colorado earnings are small enough that you have no federal filing obligation, you don’t have a state one either. But if your overall income triggers a federal return, even a single day of work in Colorado can pull you into the state’s system.³

What Counts as Colorado Source Income

Colorado taxes nonresidents only on income connected to the state. The main categories are:⁴

Wages and salaries for work you physically performed in Colorado. If your employer is based in Colorado but you work remotely from another state, those wages are generally sourced to the state where you sit, not where the company is.
Rents, royalties, and gains from real or tangible personal property located in Colorado.
Profits from a business carried on in Colorado, whether reported on a federal Schedule C or passed through from a partnership or S corporation with Colorado operations.
Capital gains from the sale of Colorado real estate or tangible assets.

Travel into the state matters. Colorado has no de minimis safe harbor for brief visits, so a one-day trip to speak at a conference or meet a client can produce Colorado-source wages. On the other side, income from stocks, bonds, and other intangible assets usually is not Colorado income for a nonresident. The exception is intangible income tied to a business operating in the state, such as royalties licensed through a Colorado-based business.

How the Tax Is Calculated

Colorado uses a flat income tax rate of 4.4% for the 2026 tax year.⁵ Nonresidents do not simply multiply their Colorado income by that rate. The DR 0104PN first calculates what your tax would be if all of your income were subject to Colorado tax, then multiplies that number by the ratio of your Colorado-source income to your total income. The result is that the effective rate reflects your overall income level while only the Colorado share is actually taxed.⁶

Colorado uses your federal taxable income as the starting point, so the federal standard deduction or itemized deductions carry over into your Colorado calculation.⁵ Business expenses that reduce your federal income from Colorado operations flow through the same way.

If you run a business in more than one state, apportionment goes deeper. Business income has to be allocated based on the share of operations actually conducted in Colorado, which can factor in where services are performed, where property is located, and where sales occur.

Withholding and Estimated Payments

A Colorado employer must withhold state income tax from wages paid to a nonresident for work performed in the state, even if the employee only works there part of the time.⁷ Check your W-2 before you file. It should show only the Colorado-source wages and the Colorado tax withheld. Mismatches between a W-2 and a return are a common audit trigger.

If you expect to owe more than $1,000 to Colorado after subtracting withholding and credits, you have to make quarterly estimated payments during the year.⁴ This mainly catches nonresidents with rental income, business profits, or other Colorado income that has no tax taken out at the source. Skipping or underpaying those installments triggers interest at the same elevated rates described below.

Selling Colorado Real Estate

If you sell Colorado real estate as a nonresident, the closing agent is required to withhold and remit to the Department of Revenue the lesser of 2% of the sale price or your net proceeds from the transaction.⁴ That money is a prepayment of your Colorado tax on the gain, and you claim it back on your return. Three situations are exempt:⁸

The sale price is under $100,000.
The property is being acquired by a lender through foreclosure or deed in lieu of foreclosure.
The seller provides a sworn affirmation certifying Colorado residency, principal residence status, or that no tax will be owed on the sale. The closing agent can rely on it in good faith.

If the amount withheld exceeds your actual tax on the gain, the difference comes back as a refund when you file. That is common when a property sold at a loss or the gain was small relative to the sale price.

Credits You Can and Can’t Claim

Nonresidents have access to fewer Colorado credits than residents do. Two in particular do not apply, even though they often come up:

The Colorado Earned Income Tax Credit, which equals 25% of the federal EITC for 2026 and later years, is only available to full-year and part-year Colorado residents.⁹
The state’s Child Care Expenses Tax Credit explicitly excludes nonresident filers.

The spouse of an active-duty servicemember stationed in Colorado has a separate route. Under the federal Military Spouses Residency Relief Act, a spouse who is in Colorado solely to be with the servicemember and remains a legal resident of another state can exempt Colorado-earned wages, salaries, and unemployment compensation from state tax. To stop withholding at the source, the spouse files Form DR 1059 with the employer.¹⁰

Late Filing, Penalties, and Interest

Colorado combines its late-filing and late-payment penalties into one charge: the greater of $5 or 5% of the unpaid tax, plus 0.5% for each additional full or partial month the balance stays unpaid, capped at 12% of the unpaid tax.¹¹

Interest runs on top of the penalty, from the original due date until the day you pay. For 2026, the discounted rate is 8%, which applies if you pay before the Department issues a notice of deficiency or within 30 days after receiving one. Miss that window and the rate jumps to 11%.¹¹ If you know you’ll owe and can’t pay in full by the deadline, filing on time and paying what you can still limits the damage.

If the Department Questions Your Return

Colorado’s assessment period for income tax is tied to the federal timeline. The state generally has one year after the federal statute of limitations expires to assess additional tax. Since the IRS normally has three years from your filing date, that gives Colorado roughly four years. There is no time limit at all if you never file or if you file a fraudulent return.

During an audit, expect requests for pay stubs, rental agreements, business records, and anything that documents how you divided income between Colorado and your home state. If you disagree with the result, you have 30 days from the mailing date of the Notice of Deficiency to file a written protest. The deadline is strict and the Department cannot extend it.¹² Most disputes that reach the formal hearing stage come down to how income was apportioned between states, which is why detailed records from the start are the strongest defense you can build.

1
Department of Revenue – Taxation. Part-Year and Nonresident
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Department of Revenue – Taxation. DR 0104PN – Part-Year Resident/Nonresident Calculation Schedule
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Department of Revenue – Taxation. Individual Income Tax Filing Requirements
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Department of Revenue – Taxation. Income Tax Topics: Part-Year Residents and Nonresidents
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Department of Revenue – Taxation. Individual Income Tax Guide
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LII / Legal Information Institute. 39-22-110 – Apportionment of Tax for Part-Year Residents and Nonresident Individuals
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Justia Law. Colorado Revised Statutes Title 39 – Taxation – Section 39-22-604 – Withholding Tax
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Justia Law. Colorado Revised Statutes Section 39-22-604.5 – Withholding Tax – Transfers of Colorado Real Property – Nonresident Transferors
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Department of Revenue – Taxation. Colorado Earned Income Tax Credit (COEITC)
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Department of Revenue – Taxation. Income Tax Topics: Military Servicemembers
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Department of Revenue – Taxation. Tax Topics: Penalties and Interest
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Department of Revenue – Taxation. Protest Rights and Process