Colorado capital gains tax on real estate is a flat 4.40% on the whole gain, and most Colorado property that goes through an exchange is owned by someone who doesn't live here, so the 2% nonresident withholding at closing is the step that trips people up. A 1031 exchange Colorado sellers set up correctly defers the state tax and the much larger federal tax together, and Form DR 1083 keeps the title company from withholding. What it does not touch is the grandfathered transfer tax in the resort towns.
Reviewed by Jon Hilley, CEO & Founder of 1031 Specialists. Last reviewed September 29, 2026.
| State tax on real estate gains | Flat 4.40% (statutory rate; 4.25% for 2024 after a TABOR trigger) |
|---|---|
| Long-term capital gains treatment | Taxed as ordinary income; subtraction limited to qualifying agricultural land |
| Nonresident withholding at closing | Lesser of 2% of price or net proceeds on sales over $100,000 |
| Withholding form | DR 1083 (affirmation) and DR 1079 (payment) |
| Transfer or conveyance tax (a 1031 does not defer it) | State documentary fee of $0.01 per $100; 1% to 1.5% in resort towns such as Vail, Breckenridge and Aspen |
| Clawback on out-of-state replacement property | None |
| Conforms to Section 1031 | Yes, automatically |
| Property tax note | 2026 assessment rates: about 7% residential vs. 25% improved commercial |
Table of contents
- How much is capital gains tax on real estate in Colorado?
- Colorado tax on a $300,000 gain: worked example
- Colorado's 2% nonresident withholding and how an exchange avoids it
- Transfer taxes: a tiny state fee, 1% or more in the resort towns
- Colorado conforms to Section 1031, with no clawback
- Property tax: the class gap and metropolitan districts
- Short-term rental rules in the resort markets
- How a Colorado closing runs in an exchange
- Moving into or out of Colorado: the California corridor and other cross-state exchanges
- Colorado markets
- The federal rules in brief
- Mistakes we see in Colorado exchanges
- Start your Colorado 1031 exchange
- Frequently asked questions
- Sources
How much is capital gains tax on real estate in Colorado?
Colorado capital gains tax on real estate is not a separate tax. Colorado taxes the gain as ordinary income at a single flat rate, 4.40% by statute for 2025 and later years. There are no brackets and no lower rate for long-term gains. The old Colorado capital gain subtraction for long-held Colorado assets now survives only as the Colorado Agricultural Land Capital Gain Subtraction (claimed with Form DR 1316), so a rental house, apartment building or commercial property gets no state break. Depreciation recapture is taxed at the same 4.40%.
The flat rate has been cut temporarily in years when TABOR revenue surpluses triggered a one-year reduction: it was 4.25% for tax year 2024 and 4.40% for 2025. The rate on an eventual taxable sale is set by the year of that sale, so plan at 4.40% and confirm the rate for the year you close. There is no local income tax on gains. Nonresidents owe Colorado tax on Colorado-source gain and file Form DR 0104 with the DR 0104PN nonresident schedule.
The federal stack on the same sale is where most of the money is: long-term capital gains at 15% or 20% (the 20% bracket starts at $545,500 of taxable income for single filers and $613,700 for joint filers in 2026), the 3.8% net investment income tax above $200,000 single or $250,000 joint, and up to 25% on unrecaptured Section 1250 depreciation. Our capital gains vs. 1031 comparison shows the full stack for your numbers.
Colorado tax on a $300,000 gain: worked example
Assumptions: a $300,000 long-term gain on a Colorado investment property, $100,000 of it unrecaptured Section 1250 depreciation, a married couple filing jointly who are already in the top federal bracket, and Colorado's 4.40% flat rate with no subtraction available.
| Federal: 25% on $100,000 of unrecaptured §1250 gain | $25,000 |
|---|---|
| Federal: 20% on the remaining $200,000 | $40,000 |
| Federal: 3.8% NIIT on $300,000 | $11,400 |
| Federal subtotal | $76,400 |
| Colorado: 4.40% x $300,000 | $13,200 |
| Total tax deferred by a full 1031 exchange | $89,600 |
A nonresident owes the same $13,200 on a Colorado property; the 2% withholding below is only a prepayment toward it. Run your own recapture figure with the depreciation recapture calculator.
Colorado's 2% nonresident withholding and how an exchange avoids it
When a nonresident sells Colorado real property for more than $100,000, the title company must withhold the lesser of 2% of the sales price or the seller's net proceeds and send it to the Department of Revenue with Form DR 1079 within 30 days of closing. The seller recovers it on a Colorado nonresident return the next year, but in an exchange it's cash that should have gone to your intermediary, and it can leave you short at the replacement closing. On a $1.5 million sale that's $30,000.
Form DR 1083 is how you avoid it. The seller signs it at closing, and one of its affirmations is that the transferor reasonably expects to owe no Colorado income tax from the inclusion of the actual gain in income. In a full like-kind exchange no gain is recognized, and your exchange documents are the support for that affirmation. The form has no separate 1031 checkbox, which is why the closer needs to see the exchange paperwork. Three practical points:
- The title company has to know it's an exchange before the settlement statement is drafted. We send the exchange agreement, the assignment and the notice to the closer as soon as you engage us and confirm the DR 1083 treatment with them directly.
- Partial exchanges are the gray area. If you're taking cash out, the recognized gain isn't zero and the closer may withhold. Settle the amount of any boot with your CPA before closing. Our partial exchange calculator gives you that figure.
- Entity sellers are handled differently. A seller that is a partnership under Section 761(a), which includes most multi-member LLCs, can affirm that status on the DR 1083 instead of being withheld on. Corporations with a permanent place of business in Colorado are also excepted. Confirm with the closer early rather than at the table.
Transfer taxes: a tiny state fee, 1% or more in the resort towns
Colorado's statewide documentary fee is one cent per $100 of consideration on sales over $500, just $100 on a $1 million sale, and the TABOR amendment bars new real estate transfer taxes. What survived is the transfer taxes the resort towns already had on the books, which were grandfathered and remain among the highest in the country. Vail charges 1%, with the parties jointly responsible. Breckenridge charges 1% of gross consideration, paid by the buyer. Aspen charges 1% for affordable housing (the first $100,000 is excluded) plus 0.5% for arts and culture, paid by the purchaser. Telluride, Crested Butte, Avon, Snowmass Village, Frisco, Winter Park and several smaller mountain towns levy their own transfer taxes at their own rates.
A 1031 exchange doesn't defer any of it. On a $4 million Breckenridge replacement property the 1% is $40,000 at closing; in Aspen the same price costs about $59,000. Transfer tax is generally treated as an exchange expense, so it can be paid from exchange funds without creating boot, but it's money that isn't going into the building. Confirm the current rate and who pays with the town before you sign.
Colorado conforms to Section 1031, with no clawback
Colorado's income tax starts from federal taxable income and does not decouple from Section 1031. Gain deferred on your federal return is deferred for Colorado automatically, with no state election and no annual tracking form. Colorado has no clawback like California's FTB 3840: exchange out of state and Colorado asks for no annual report.
When you eventually sell the replacement property without exchanging, Colorado taxes the deferred gain if you're a resident then, or to the extent the final property is in Colorado if you're not. Holding until death can erase it through the basis step-up; see our swap till you drop guide.
Property tax: the class gap and metropolitan districts
Colorado property tax is two numbers multiplied together: an assessment rate set statewide by property class, and a mill levy set by the taxing districts the parcel sits in. The assessment rate is what surprises investors from other states. For 2026, residential property, which includes apartment buildings, is assessed at 7.05% of actual value for school levies and 6.8% for local government levies (less a reduction on the first $700,000 of value). Improved commercial property is assessed at 25%, and most other nonresidential classes at 26%. Same value, same mill levy, and the commercial building pays roughly three and a half times the tax. At 80 mills, a $5 million apartment building is assessed at about $350,000 and pays about $28,000 a year; a $5 million office or retail building is assessed at $1.25 million and pays about $100,000. A commercial cap rate that looks generous next to multifamily may be taxes rather than opportunity.
The second surprise is metropolitan districts: much suburban development since the 1990s sits inside a metro district that services its infrastructure bonds through an extra mill levy. Countywide averages hide this. Pull the certified levy for the specific parcel from the county assessor before you underwrite.
Short-term rental rules in the resort markets
Colorado's mountain towns have spent recent years restricting nightly rentals. Check at the parcel level; the main tools are:
- License caps by zone, with waitlists. Breckenridge and unincorporated Summit County cap licenses in residential zones; outside the exempt resort zones, a new owner may wait years or never get one.
- Overlay zones and permit classes. Steamboat Springs limits new rentals outside overlay areas; Aspen issues different permits for owner-occupied and non-owner-occupied rentals and adds its own tax on short stays.
A license generally does not transfer with the property. Before you identify a resort replacement, confirm that a new owner can get a license at that address, how long it takes and what the all-in tax on a nightly stay is. If the answer is no new licenses in that zone, underwrite it as a long-term rental.
A vacation property also qualifies only if it's held for investment. The IRS safe harbor in Revenue Procedure 2008-16 asks for at least 14 days of fair-market rental and personal use no greater than 14 days or 10% of rented days, in each of the two years before the sale and after the purchase. A family ski condo can fail that test.
How a Colorado closing runs in an exchange
Colorado closings are run by title companies, so the closer is who we coordinate with on the exchange agreement, the assignment and the DR 1083, all before closing.
In resort inventory, the replacement property often has to be tied up before the sale closes. A reverse exchange, where an exchange accommodation titleholder parks the replacement property until your sale closes, is common in Summit, Eagle and Pitkin counties for that reason, and it has to be set up before you close on the purchase.
Moving into or out of Colorado: the California corridor and other cross-state exchanges
California to Colorado is the corridor. California sellers exchange out of the state's 13.3% top rate into Denver multifamily and the resort markets every year, and California follows the deferred gain. For as long as you hold the Colorado replacement property, California requires an annual Form FTB 3840, and when you eventually sell in a taxable sale, California taxes the California-source portion of the gain even if you've been a Colorado resident for a decade. Colorado has no equivalent. See our California 1031 guide for the sale-side rules.
Texas and Arizona sellers are the next largest inbound group. Outbound, Colorado owners most often exchange into Wyoming, an hour north of Fort Collins with no state income tax, or into Texas. Moving out doesn't end Colorado's claim on a Colorado property you keep. If the seller of a Colorado resort property is a foreign person, FIRPTA's federal withholding applies alongside DR 1083; our FIRPTA guide explains how the two interact.
Colorado markets
Denver and its suburbs carry most of Colorado's exchange volume; see our guide to a 1031 exchange in Denver. Industrial near the airport is the deepest institutional market, multifamily is working through a wave of new supply, and downtown office is where the distressed opportunities are. Colorado Springs offers multifamily at lower entry prices, and Fort Collins and Loveland ride Northern Colorado's growth. Boulder is life sciences, tech and the most expensive submarket outside the resorts; read about a 1031 exchange in Boulder. Grand Junction anchors the Western Slope at lower prices. The resort markets, Aspen and Snowmass, Vail and Beaver Creek, Breckenridge and the rest of Summit County, Steamboat Springs, Telluride and Crested Butte, carry the highest values, the transfer taxes and the licensing regime described above.
The federal rules in brief
You have 45 days from the sale to identify replacement property in writing and 180 days to close on it. A qualified intermediary must hold the proceeds; if they touch your account, the exchange fails. To defer everything, buy at equal or greater value and replace the debt you paid off, or add cash. Check your list with the 45-day identification validator and model the numbers in the 1031 exchange calculator.
Mistakes we see in Colorado exchanges
- Letting the title company withhold 2% because no one told the closer it was an exchange until the settlement statement was final.
- Underwriting a resort replacement on short-term rental income without confirming a new owner can get a license at that address.
- Comparing a commercial cap rate to a multifamily cap rate without adjusting for the 25% versus roughly 7% assessment gap.
- Forgetting the resort transfer tax on the purchase side of the exchange.
- Using a vacation property too much personally to meet the investment-use safe harbor.
Start your Colorado 1031 exchange
Engage us before the relinquished property closes so the exchange documents and the DR 1083 reach the title company in time. We prepare the exchange agreement, assignment and notice, confirm the withholding treatment with your closer, hold the proceeds in a segregated account, calendar the 45- and 180-day deadlines and coordinate the replacement closing in Colorado or any other state. Start your exchange online, book a call to walk through a Colorado deal.
Frequently asked questions
How can I avoid capital gains tax on real estate in Colorado?
Reinvest the proceeds through a 1031 exchange with a qualified intermediary. A full exchange defers both the federal tax and Colorado's 4.40% flat tax. Holding the replacement property until death can eliminate the deferred gain through the basis step-up. Colorado's own capital gain subtraction now applies only to qualifying agricultural land.
Is there withholding when a nonresident sells Colorado property?
Yes. On sales over $100,000 the title company withholds the lesser of 2% of the price or the net proceeds and remits it on Form DR 1079. In a full 1031 exchange the seller affirms on Form DR 1083 that no Colorado tax is expected from the gain, and nothing is withheld.
Does Colorado have a real estate transfer tax?
Statewide, only a documentary fee of one cent per $100. Grandfathered transfer taxes apply in resort towns, including 1% in Vail and Breckenridge and 1.5% in Aspen, and a 1031 exchange does not defer them.
Can I 1031 into a short-term rental in Breckenridge or Aspen?
Yes, if it is held for investment and rented at fair market value, with your personal use inside the IRS safe harbor. The practical constraint is licensing: confirm a new owner can get a short-term rental license at that address before you identify it.
I'm selling in California and buying in Denver. What does California do?
California requires an annual Form FTB 3840 for as long as you hold the Colorado property and taxes the California-source gain when you eventually sell without exchanging. Colorado has no tracking requirement of its own.
Sources
- Colorado Department of Revenue: Individual income tax guide (rates by year)
- Colorado Form DR 1083 and instructions (2025)
- Colorado income tax topic: withholding on real property sales by nonresidents
- Colorado Form DR 0104AD (Agricultural Land Capital Gain Subtraction)
- Weld County Clerk and Recorder: state documentary fee
- Pitkin County Assessor: Colorado assessment rates 2025 and 2026
- City of Aspen: Real Estate Transfer Tax
- Town of Vail: Real Estate Transfer Tax
- Town of Breckenridge: Real Estate Transfer Tax
Related: Utah, New Mexico, Nebraska and all 50 states.
This page is general information, not tax or legal advice. We act as a qualified intermediary; confirm current Colorado and local rates with your tax advisor before you close.
