By Andy L. Gitkind | Gitkind Law Firm | Boulder County Estate Planning
If you’ve recently lost someone you love—or you’re thinking ahead for your own family—you’ve probably wondered whether Colorado taxes what gets passed on. The short answer is reassuring: Colorado does not have a state estate tax or a state inheritance tax. But the full picture is a bit more nuanced, and understanding it can help you plan with confidence.
Let’s walk through what you actually need to know.
What Is an Estate Tax?
An estate tax is a tax on the total value of a person’s assets at the time of their death, paid by the estate before anything is distributed to beneficiaries. Think of it as a tax on the right to pass wealth on.
Colorado repealed its state estate tax back in 2005. So if you live in Boulder County and pass away today, your estate will not owe any tax to the state of Colorado based on its size alone.
What Is an Inheritance Tax?
An inheritance tax is different—it’s paid by the people who receive assets, not by the estate itself. The rate can vary depending on the relationship between the person who died and the person inheriting.
Colorado has never had a state inheritance tax, and it does not have one today. If you inherit money, property, or other assets from a Colorado resident, you will not owe Colorado any tax simply for receiving that inheritance.
What About the Federal Estate Tax?
Here’s where things get more complex for higher-net-worth families. The federal government does impose an estate tax, and it applies to estates above a certain threshold—called the exemption amount.
For 2026 the federal estate tax exemption is $15 million per individual (or $30 million for a married couple using both exemptions) Under current federal law, this amount will be inflation adjusted annually. That means the vast majority of Colorado families will never owe a dollar of federal estate tax.
Does Colorado Tax an Inheritance as Income?
This is a question that comes up often. If you inherit cash or investments, you generally do not owe income tax on the inherited amount itself. However, if those inherited assets later generate income—interest, dividends, rental income—that income is taxable in the ordinary way.
Also, federal law incorporates a concept called step-up in basis on death. This means that all capital gains of assets that appreciated during the life of a decent are essentially cancelled as a result of death while owning that appreciated asset. More specifically, the tax basis of such an asset is raised to the date-of-death value, so an immediate sale results in zero capital gain.
There is also a concept called income in respect of a decedent (IRD), which applies to certain assets like inherited IRAs or 401(k)s. Distributions from an inherited retirement account are generally taxable as ordinary income to the beneficiary. This is an area where careful planning—particularly around how retirement accounts are titled and who is named as beneficiary—can make a meaningful difference.
So Why Does Estate Planning Still Matter?
The absence of a Colorado estate tax does not mean estate planning is less important. Quite the opposite. Here’s why:
- Without a plan, Colorado’s intestacy laws decide who inherits your assets—and the outcome may not match your wishes.
- Probate in Colorado may be time-consuming and public, even for modest estates.
- Federal estate tax planning becomes critical for families with significant assets.
- Proper beneficiary designations on retirement accounts and life insurance can have a major impact on how much tax a family ultimately pays.
- Trusts and gifting strategies can help preserve wealth across generations in ways a simple will cannot.
The goal of a good estate plan isn’t just to minimize taxes—it’s to make sure your wishes are honored, your family is protected, and the people you love aren’t left sorting through confusion at an already difficult time.
A Note on Gift Taxes
Colorado also has no state gift tax. At the federal level, you can give up to $19,000 per person per year in 2026 without any gift tax implications (this is called the annual gift tax exclusion). Gifts above that amount count against your lifetime federal exemption.
Strategic gifting is one of the most effective ways for Colorado families to reduce potential federal estate tax exposure.
What About Other States?
Inheriting real property in other states or from those resident in another state may result in estate or inheritance taxes. Consult with an estate tax attorney for information about this complexity.
Questions About Your Situation?
Every family’s circumstances are different. Whether you’re wondering how to structure your estate to minimize taxes, what happens to your retirement accounts, or simply what documents you need to have in place, the team at Gitkind Law Firm is here to help.
Andy Gitkind has focused exclusively on estate planning, wills, trusts, and probate in Boulder County since 2004. If you have questions about how Colorado’s tax landscape affects your family, we’d be glad to talk.
Gitkind Law Firm, P.C. | 801 Main St., Suite 230, Louisville, CO 80027 | 303-960-6628 | gitkindlaw.com