How to File a Colorado Fiduciary Income Tax Return

An estate or trust that owes Colorado tax or is required to file a federal income tax return must submit a Colorado fiduciary income tax return on Form DR 0105.¹ The return is due by the fifteenth day of the fourth month after the tax year closes, and Colorado taxes fiduciary income at the same flat rate it applies to individuals, which was 4.4% for the 2025 tax year.² Because the rate has moved several times through voter-approved adjustments, confirm the figure for the specific year you are filing.

Who Has to File

Two conditions must both be true. The estate or trust must be a Colorado resident entity, or a nonresident entity with Colorado-source income. And it must also be required to file a federal income tax return, typically Form 1041, or owe Colorado tax.³ The IRS threshold for Form 1041 is more than $600 in annual gross income for an estate.⁴

Residency turns on where the entity is administered, not where the fiduciary lives. A resident estate is one administered in Colorado in a proceeding other than an ancillary proceeding. A resident trust is one administered in Colorado. Anything else is a nonresident entity.⁵

When the Return Is Due

For a calendar-year filer, the deadline is usually April 15. Colorado grants an automatic six-month extension to file, which moves the deadline to October 15 for calendar-year filers.⁶

The extension is for filing the paperwork, not for paying the tax. Any balance is still due by the original deadline. If you expect to owe, send a payment with the extension request or penalties and interest start running.

Colorado does not require estimated tax payments from estates and trusts. Voluntary estimated payments can be submitted through Revenue Online or by mailing a check with Form DR 0105EP.⁶

How to Calculate the Tax

The Colorado return builds on the federal return, so finish Form 1041 first. Start with federal taxable income, apply Colorado-specific additions and subtractions, and then apply the flat rate to the result.²

Additions

Certain items that reduced federal taxable income have to be added back for Colorado:

State income tax deducted on the federal return, because Colorado does not allow a deduction for its own tax.
Interest from bonds issued by other states or their subdivisions, net of any bond premium amortization. Only Colorado’s own state and local government bond interest is exempt.
Any federal deduction taken for business meals.
A charitable deduction for a gross conservation easement, if a Colorado credit was also claimed for the same easement.

Subtractions

Common items that reduce Colorado taxable income below the federal figure:

State income tax refunds included in federal taxable income.
Interest from U.S. government obligations such as Treasury bonds, to the extent included in federal taxable income.
Qualifying capital gains from the sale of agricultural land.
Contributions to a qualified state tuition program administered by CollegeInvest, to the extent included in federal taxable income.

Once the additions and subtractions have been netted out, allocate the result between the estate or trust and its beneficiaries according to the governing document. Income distributed to beneficiaries passes through to them and reduces the entity’s taxable amount. Income retained at the entity level is taxed there.²

Deductions and Credits

Most deductions track federal law. Trustee fees, attorney fees, accounting costs, and other administrative expenses tied to the estate or trust are deductible. Charitable contributions are deductible when the governing document authorizes them.

The credit fiduciaries most often use is the credit for income taxes paid to other states, which prevents the same income from being taxed twice when another state has already reached it. Documentation matters: keep records showing that the income was taxed in the other jurisdiction and the amount of tax paid. Improperly calculated credits get adjusted.

Nonresident Estates and Trusts

A nonresident entity owes Colorado tax only on Colorado-source income. The statute defines that as:

Income from owning real or tangible personal property located in Colorado.
Income from a business, trade, or profession carried on in Colorado.
The entity’s share of partnership or LLC income attributable to Colorado.
The entity’s share of S corporation income allocable to Colorado.
Income from intangible property to the extent it is connected to a Colorado business.

⁷

A nonresident entity with business activity both inside and outside Colorado apportions its income using the formula prescribed for multistate businesses, which produces a ratio of Colorado-source income to total income and applies it to net income.⁸

Withholding on Nonresident Beneficiaries

Any estate or trust distributing income from Colorado real or tangible personal property to a nonresident beneficiary must withhold Colorado income tax at the standard rate. If the beneficiary files their own Colorado return, the fiduciary only needs to withhold the amount shown on that return, and the beneficiary can claim a refund for any excess.³ This obligation is one of the more common compliance failures for fiduciaries managing multistate beneficiary pools.

Don’t Forget the Federal 3.8% Investment Tax

Colorado is not the only tax to plan around. The federal Net Investment Income Tax of 3.8% hits estates and trusts at a much lower threshold than it hits individuals. For 2025 that threshold was $15,650 in adjusted gross income, and it adjusts annually for inflation.⁹ When AGI exceeds the threshold, the 3.8% applies to the lesser of undistributed net investment income or the amount by which AGI exceeds the threshold. Charitable trusts, grantor trusts, and perpetual care trusts are exempt. For other trusts, distributing investment income to beneficiaries before year-end moves it out of the trust and away from the trust-level threshold.

Late Filing and Late Payment

Colorado charges a combined penalty for filing or paying late: the greater of $5 or 5% of the unpaid tax, plus 0.5% for each full or partial month the tax remains unpaid. The total penalty cannot exceed 12% of the unpaid amount.¹⁰

Interest runs separately from the original due date until the tax is paid, and it compounds daily using the annual rate divided by 365. For 2026, Colorado uses two rates. The discounted rate of 8% applies if the tax is paid before a notice of deficiency is issued or within 30 days of receiving one. The regular rate of 11% applies if you do not pay or reach a payment agreement within that 30-day window. Rates can change year to year, so multi-year balances may involve different rates for different periods.¹¹

If You Disagree With a Deficiency Notice

After a return is filed, the Colorado Department of Revenue can review it and determine the correct tax owed. If additional tax is due, the department mails a notice of deficiency.¹² Discrepancies between the federal 1041 and the DR 0105, incomplete documentation, or unusual deductions and credits raise the chance of a closer look, so reconcile the two returns before filing and keep the underlying records for income, expenses, and distributions.

If you disagree with the notice, you have 30 days from the mailing date to request a hearing with the executive director.¹² That window is strict; miss it and you generally accept the assessment. If the administrative hearing does not resolve the dispute, the fiduciary can escalate to the Colorado Taxpayer Advocate or take the matter to Colorado District Court or the Colorado Court of Appeals.

1
Department of Revenue – Taxation. DR 0105 – Fiduciary Income Tax Return
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Colorado Department of Revenue. Colorado Fiduciary Income Tax Return Instructions
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Justia. Colorado Revised Statutes 39-22-601 – Returns
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Internal Revenue Service. File an Estate Tax Income Tax Return
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Justia. Colorado Revised Statutes 39-22-103 – Definitions
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Colorado Department of Revenue. Fiduciary Income Tax Filing Information
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Justia. Colorado Revised Statutes 39-22-109 – Income of a Nonresident
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Legal Information Institute. Colorado Regulation 39-22-303.6-3 – Apportionment and Allocation of Income
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Internal Revenue Service. Topic No. 559, Net Investment Income Tax
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Colorado Department of Revenue. Tax Topics – Penalties and Interest
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Colorado Department of Revenue. Tax Topics – Penalties and Interest
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Justia. Colorado Revised Statutes 39-21-103 – Hearings