What is Colorado's crypto tax rate for 2025?

Colorado imposes a flat 4.4% income tax rate on all taxable income including cryptocurrency gains for 2025. The rate temporarily dropped to 4.25% for 2024 due to TABOR revenue triggers but returned to 4.4%.

Colorado Crypto Tax Services

Q: Should I pay my Colorado taxes with cryptocurrency?

It depends on your cost basis. Using appreciated crypto triggers a capital gain, creating additional tax. If you have crypto at current prices (minimal gain) or losses to offset, it may work. Otherwise, paying with dollars is simpler.

Colorado taxes cryptocurrency gains at a flat 4.4% rate with no distinction between short-term and long-term holdings. As one of the first states to accept crypto for tax payments, Colorado has embraced digital assets while maintaining straightforward compliance requirements. This guide covers Colorado-specific rules and 2025 federal requirements.

Colorado Crypto Tax Rules: Quick Summary

Colorado follows federal treatment of cryptocurrency as property while applying its own flat tax rate. Here are the essential facts for 2025:

Flat 4.4% Tax Rate: All crypto gains (short-term and long-term) taxed at the same rate for 2025
No Long-Term Preference: Unlike federal rules, Colorado does not offer lower rates for assets held over one year
Crypto Tax Payments: Colorado accepts cryptocurrency for state tax payments through PayPal
Federal Conformity: Colorado follows federal treatment of crypto as property
Capital Loss Rules: $3,000 annual deduction limit against ordinary income with unlimited carryforward
Filing Deadline: April 15 with automatic extension to October 15 (payment still due April 15)

The Crypto-Forward State: Colorado Leads in Digital Asset Adoption

Colorado consistently ranks among the top states for cryptocurrency usage, driven by a tech-forward government and population. Under Governor Jared Polis, Colorado made headlines as one of the first states to accept cryptocurrency for state tax payments—a symbolic embrace of digital assets.

Crypto Payment Acceptance

The Colorado Department of Revenue accepts cryptocurrency through the PayPal Cryptocurrencies Hub for various state taxes including:

Individual income tax
Sales and use tax
Withholding tax
Severance tax

Important: Only PayPal Personal accounts are eligible—PayPal Business accounts cannot be used for crypto tax payments. A service fee of $1.00 plus 1.83% of the payment amount applies.

Digital Token Act Repeal

Note that Colorado's Digital Token Act was repealed effective August 7, 2024 (SB24-180). The state no longer provides state-level securities exemptions for digital tokens and defers entirely to federal law on securities classification.

At Monaco CPA, we provide remote crypto tax services to Colorado residents throughout the state. From Denver's growing tech scene to Boulder's startup community to remote workers throughout the mountains, we help Colorado's crypto-savvy population navigate complex tax obligations.

2025 Regulatory Changes Affecting Colorado Crypto Investors

Federal regulatory changes add new compliance requirements for all Colorado taxpayers. The Colorado Department of Revenue receives federal data through information sharing, meaning discrepancies will trigger scrutiny from both authorities.

Wallet-by-Wallet Cost Basis Tracking (Effective January 1, 2025)

Revenue Procedure 2024-28 requires calculating gains and losses separately for each wallet or account. FIFO is the default method unless you make specific identification elections. Notice 2025-7 provides temporary relief through 2025.

Form 1099-DA Implementation

Custodial brokers must report gross proceeds for 2025 transactions on the new Form 1099-DA. Cost basis reporting becomes mandatory for assets acquired after January 1, 2026. The Colorado Department of Revenue will receive this data through federal information sharing agreements.

DeFi Broker Rule Repealed

Public Law No. 119-5 (April 2025) means decentralized platforms won't report activity. Colorado still expects full reporting of all gains regardless of whether you receive a 1099.

Colorado State Crypto Tax Rules

Colorado treats cryptocurrency as property consistent with federal treatment. While crypto is taxed as property for income tax purposes, it is not subject to property tax in Colorado.

Capital Loss Treatment

Colorado follows federal rules for capital losses:

Losses offset gains dollar-for-dollar
Net losses deductible against ordinary income up to $3,000 per year
Unused losses carry forward indefinitely
No wash sale rules for cryptocurrency under current law

Taxable Crypto Events in Colorado

Every crypto transaction can have tax consequences under both federal and Colorado law. Understanding which events trigger taxes is essential for compliance.

Taxable Events

Selling crypto for USD or other fiat currency
Trading one cryptocurrency for another
Using crypto to purchase goods or services
Receiving crypto as payment (ordinary income)
Mining rewards (ordinary income at fair market value)
Staking rewards when received
Airdrops and hard forks
Paying Colorado taxes with crypto (triggers gain on the crypto used)

Using Crypto to Pay Colorado Taxes

While Colorado accepts crypto for tax payments, using appreciated cryptocurrency triggers a capital gain on the crypto itself. Consider this example:

You owe $10,000 in Colorado taxes
You pay with Bitcoin you bought for $4,000
You realize a $6,000 capital gain on the Bitcoin used
This creates additional tax liability on that gain

Paying with crypto is most advantageous when you have minimal unrealized gains or losses to offset the gain.

Colorado Crypto Tax Planning

Strategic planning can help minimize your Colorado and federal tax burden on cryptocurrency transactions.

Tax-Loss Harvesting

Colorado follows federal treatment—cryptocurrency is not subject to wash sale rules. You can sell crypto at a loss and immediately repurchase to realize the loss while maintaining your position. This is particularly valuable for offsetting gains.

Long-Term Holding Strategy

While Colorado taxes all gains at 4.4%, federal long-term rates (0%, 15%, 20%) are significantly lower than short-term rates (up to 37%). Holding crypto for over one year saves substantial federal taxes even though Colorado treatment is the same.

Estimated Tax Payments

Colorado requires quarterly estimated payments if you expect to owe $1,000 or more. No separate form is required—payment can be made online through the Colorado Department of Revenue.

Q1: April 15
Q2: June 15
Q3: September 15
Q4: January 15

Relocating from High-Tax States

Colorado's 4.4% rate is significantly lower than California's 13.3% or New York's 10.9%. If relocating, realize your crypto gains after establishing Colorado residency. High-tax states aggressively audit departing residents, so document your move thoroughly before executing major sales.

Services for Colorado Crypto Investors

Tax Preparation

Colorado Tax Return: Complete DR 0104 with proper capital gains reporting
Federal Coordination: Integrated federal and Colorado preparation ensuring consistency
Multi-State Returns: For clients with income in multiple states

Compliance

Transaction Reconciliation: Rev. Proc. 2024-28 compliant wallet-by-wallet tracking
Form 1099-DA Matching: Reconciling exchange-reported data to prevent notices
Cost Basis Reconstruction: For transactions on defunct exchanges or incomplete records

Planning

Tax-Loss Harvesting: Strategic loss realization without wash sale restrictions
Estimated Tax Planning: Quarterly projections to avoid underpayment penalties
Residency Change Planning: Guidance for clients relocating to or from Colorado

Representation

Audit Defense: Representation before IRS and Colorado Department of Revenue

Areas We Serve in Colorado

We serve Colorado crypto investors statewide through our remote service model:

Denver Metro: Denver, Aurora, Lakewood, Littleton, Centennial
Boulder Area: Boulder, Louisville, Broomfield, Longmont
Colorado Springs: Colorado Springs, Pueblo
Mountain Communities: Aspen, Vail, Breckenridge, Summit County
Fort Collins/Northern Colorado: Fort Collins, Greeley, Loveland

All services delivered via secure portal and video consultation—no office visit required.

Frequently Asked Questions

Should I pay my Colorado taxes with cryptocurrency?

It depends on your cost basis. Using appreciated crypto to pay taxes triggers a capital gain on the crypto itself, creating additional tax liability. If you have crypto purchased recently at current prices (minimal gain) or losses to offset gains, it may work. Otherwise, paying with dollars is simpler.

Does Colorado tax long-term crypto gains at a lower rate?

No. Colorado's flat 4.4% rate applies to all income, including both short-term and long-term capital gains. There's no state-level preferential rate for long-term holdings.

I'm moving from California to Colorado. What should I know?

Colorado's 4.4% rate is much lower than California's 13.3%. Realize your crypto gains after establishing Colorado residency to avoid California tax on those gains. California aggressively audits departing residents, so document your move thoroughly.

Does Colorado have any special crypto-friendly laws?

Colorado has been a leader in crypto acceptance, including accepting crypto for state tax payments and DMV fees. However, the Digital Token Act was repealed in August 2024, so the state no longer provides securities exemptions for digital tokens. For individual tax purposes, Colorado follows federal treatment of crypto as property.

What are gross proceeds and how are they reported for Colorado crypto tax?

Starting in 2025, custodial brokers report gross proceeds (total amount received from crypto sales) on Form 1099-DA to both the IRS and Colorado Department of Revenue. This increases information reporting and compliance requirements. Ensure your reported cost basis is accurate to avoid paying tax on more than your actual gains.

Get Expert Help with Colorado Crypto Taxes

Colorado's crypto-friendly stance doesn't eliminate tax complexity—especially with the 2025 federal regulatory changes. Let's discuss your situation and build a compliant tax strategy.

Schedule a Consultation

Phone: (862) 320-9554
Email: Greg@MonacoCPA.CPA