Does Colorado have an inheritance tax is a question many families are asking in 2026 as home values rise, retirement accounts grow, and long-term estate planning becomes more important. As of January 2026, the confirmed answer is no. Colorado does not impose a state inheritance tax on money, property, or assets passed to heirs after death. Beneficiaries are not required to pay a state tax simply because they receive an inheritance from someone who lived in Colorado.
This remains one of the most favorable aspects of Colorado’s tax structure for families and future heirs. Whether the estate is modest or substantial, the state does not reduce inherited wealth through inheritance taxation.
Understanding What an Inheritance Tax Is
An inheritance tax is a charge placed on the person who receives assets from a deceased individual. The tax is calculated based on what each beneficiary inherits and, in some states, how closely related the heir is to the person who died.
This system is different from an estate tax, which is collected from the total value of the estate before assets are distributed. With an inheritance tax, the responsibility falls on the recipient, not the estate itself.
Only a small group of U.S. states still impose this type of tax. Colorado is not one of them, and it has not enforced an inheritance tax for many years.
Colorado’s Current Inheritance Tax Law
Colorado law does not require heirs to pay any state inheritance tax, regardless of:
- The value of the estate
- The type of assets inherited
- The relationship between the deceased and the beneficiary
- Whether the heir lives in Colorado or another state
Cash, real estate, business interests, investment portfolios, vehicles, and personal belongings can all be transferred without a state tax being applied simply because of inheritance.
This applies equally to spouses, children, grandchildren, extended family members, and non-relatives named in a will or trust.
Does Colorado Have a State Estate Tax?
Colorado also does not levy a state estate tax. In the past, the state’s system was linked to federal estate tax credits. When federal law changed, Colorado’s state-level estate tax effectively disappeared.
Today, no separate Colorado estate tax exists. Estates are not taxed by the state before distribution, and heirs are not taxed after receiving assets.
As a result, estate settlement costs in Colorado typically involve:
- Probate court fees
- Legal and administrative expenses
- Appraisal costs
- Title transfers
They do not include state inheritance or estate taxes.
Federal Estate Tax in 2026 and How It Affects Colorado Families
Even though Colorado does not tax inheritances, the federal government still imposes an estate tax on very large estates.
In 2026, the federal estate tax exemption stands at approximately:
- $7 million for an individual
- $14 million for a married couple using portability
Only estates exceeding these thresholds are subject to federal estate tax. The top rate remains 40 percent on the taxable portion above the exemption.
Most estates in Colorado fall well below this level, meaning no federal estate tax is due in most cases. Still, high-net-worth families often use trusts and other planning tools to manage federal exposure.
Why This Question Is Trending in 2026
Interest in inheritance taxes has grown due to several factors:
- Rapid appreciation of Colorado real estate
- Larger retirement and investment balances
- Federal exemption changes taking effect
- Increased interstate property ownership
- More families using trusts and estate plans
When wealth increases, so does concern about how much of it will remain in the family after taxes and settlement costs.
Income Taxes and Inherited Assets
Inheritance itself is not treated as taxable income under federal or Colorado law. However, income produced by inherited assets can be taxable.
Examples include:
- Interest from inherited savings accounts
- Dividends from inherited stocks
- Rental income from inherited property
- Withdrawals from inherited traditional retirement accounts
The transfer of the asset is tax-free, but the income it generates afterward may be subject to normal income tax rules.
Capital Gains and the Step-Up in Value
One of the most valuable tax benefits for heirs is the step-up in basis.
When property is inherited, its tax basis is generally reset to its fair market value at the time of death. This means:
- Past appreciation is not taxed
- Capital gains apply only to growth after inheritance
- Selling inherited property soon after receiving it often results in little or no capital gains tax
This rule plays a major role in preserving family wealth, especially with real estate and long-held investments.
Retirement Accounts and Heirs
Inherited retirement accounts follow federal distribution rules:
- Traditional IRAs and 401(k)s are taxed when money is withdrawn
- Most non-spouse heirs must empty the account within ten years
- Roth accounts may allow tax-free withdrawals if holding requirements are met
- Colorado does not impose additional inheritance-specific taxes on these accounts
The tax arises from income recognition, not from the inheritance itself.
What If Property Is Located Outside Colorado?
Even if the deceased was a Colorado resident, inheritance or estate tax may apply if assets are located in a state that still imposes one.
For example:
- A vacation home in a state with inheritance tax
- Business property in a taxing jurisdiction
- Certain trust assets governed by out-of-state law
In such cases, that state’s tax rules may apply to those specific assets.
Estate Planning Without a State Inheritance Tax
Because Colorado does not tax inheritances, estate planning often focuses on:
- Federal estate tax thresholds
- Trust structures for large estates
- Protecting assets from probate delays
- Coordinating beneficiary designations
- Planning for multistate property
- Preserving step-up benefits
For many families, the absence of a state inheritance tax allows for simpler and more flexible planning strategies.
Common Misunderstandings
Many people believe all states tax inheritances. In reality:
- Most U.S. states do not impose inheritance taxes
- Only a few still do
- Colorado has neither inheritance nor estate tax at the state level
- Federal estate tax affects only large estates
This confusion often comes from mixing up inheritance tax, estate tax, and income tax.
Long-Term Outlook
As of early 2026, there is no enacted Colorado legislation creating an inheritance tax. Any future change would require formal approval by the state legislature and would be widely publicized before taking effect.
For now, the legal position is firm and clear.
Final Summary
So, does Colorado have an inheritance tax? The answer remains no. Colorado residents and their heirs benefit from one of the most favorable state tax environments for transferring wealth. Assets can pass from one generation to the next without state inheritance or estate taxes reducing their value.
This reality makes Colorado an attractive state for retirees, investors, and families planning long-term wealth preservation.
Understanding these rules today helps families plan with confidence and protect what they’ve worked hard to build for the next generation.