Colorado payroll tax comes down to two numbers: 4.4% and 0.9%. The first is the flat state income tax rate — no brackets, no phase-outs, just straightforward math. The second is FAMLI, the state's mandatory paid family leave premium, and it's the one that blindsides almost every small employer running payroll in Colorado for the first time in 2026. Here's exactly what you owe, what you withhold, and how to remit both.
- 4.4% flat state income tax — withheld from every employee's taxable wages, no brackets
- FAMLI employee rate: 0.45% of wages — withheld from every paycheck, every employee
- FAMLI employer rate: 0.45% — employers with fewer than 10 employees are exempt from the employer share
- Colorado unemployment (UITR): 1.7% new employer rate on the first $23,800 — employer cost only
- Itemized pay stubs are legally required — gross pay, all deductions, and net pay, every period
Colorado State Income Tax Withholding: Flat Rate, Real Math
Colorado's 4.4% flat income tax rate applies to every dollar of employee wages in 2026, per the Colorado Department of Revenue. No brackets. No tiered schedules. No phase-outs. Multiply taxable wages by 0.044 — that's your withholding for the period. Done.
Before you run the numbers, collect the DR 0004 — Colorado's Employee Withholding Certificate, the state equivalent of a federal W-4. It captures the employee's standard deduction allowance, which reduces taxable wages before you apply the 4.4%. No DR 0004 on file? Default to the standard single allowance and move on.
- 1Collect the DR 0004 from each new hire — sets their withholding allowances and deduction amount
- 2Determine taxable wages — gross pay minus pre-tax deductions (health insurance, 401k, HSA) and the DR 0004 standard deduction allowance
- 3Multiply by 4.4% — that's your Colorado state withholding for the pay period
- 4Remit via Revenue Online or SUTS — frequency depends on quarterly liability; most micro-employers file monthly or quarterly
One thing Colorado doesn't carry: local income taxes. Ohio. Pennsylvania. They'll bury you in municipal rates. Colorado employers deal with one state rate and nothing below it. For a small operation, that's a genuine advantage.
FAMLI: The Colorado Obligation Most Small Employers Miss
Here's the one that bites people. Colorado's Family and Medical Leave Insurance (FAMLI) program launched in January 2024. A lot of small employers still don't know they're required to participate — no matter the headcount.
"Every Colorado employer must participate in FAMLI. The only size-based break is on the employer's contribution — not the employee's."
The 2026 total FAMLI premium rate is 0.9% of wages, assessed on wages up to the Social Security wage base. It splits evenly: 0.45% from the employee (you withhold it from their paycheck) and 0.45% from the employer (you pay this on top). Both amounts go through the MyFAMLI+ Employer portal, filed quarterly.
Fewer than 10 employees? You only withhold and remit the employee share (0.45%) — the employer's matching 0.45% is waived. But you still must register with MyFAMLI+, collect the employee contribution, and file every quarter. Skipping registration because you're small is the most expensive mistake Colorado micro-employers make.
Consider Denise, a Denver bookkeeper with 6 employees — a composite of the micro-business owners we work with regularly. She assumed FAMLI was for bigger outfits and skipped registration entirely in 2024. Catching up in 2025 meant back contributions, interest, and penalties. Under the small-employer exemption, her actual out-of-pocket employer cost was zero. The paperwork catch-up was not. Don't be Denise.
Employees who qualify can take up to 12 weeks of paid leave under FAMLI. The program pays the benefits directly. Your job: collect, remit, keep accurate wage records.
FAMLI is one of the newest mandatory paid leave programs in the country. Many Colorado employers who set up payroll before 2024 were never walked through it by their provider — and it still doesn't appear on most basic payroll checklists. Check yours.
The Rest of Your Colorado Payroll Checklist
Beyond income tax and FAMLI, a few additional obligations apply. None are complicated. Missing any of them will cost you anyway.
The pay stub rule trips people up constantly. Colorado explicitly requires itemized pay stubs — not a net-pay figure scrawled on a check, not a verbal summary. Every period: hours worked (if hourly), gross wages, FAMLI deduction, state income tax withheld, federal withholdings, net pay. Hand an employee anything less and you're already non-compliant.
Fewer than 10 staff: withhold 4.4% state income tax from each paycheck, withhold 0.45% FAMLI from each employee's wages and remit quarterly, and pay unemployment (1.7% for new employers) on the first $23,800 of wages. Federal obligations stack on top. Three line items. Manageable for any operation that stays organized.
Frequently Asked Questions
What is the Colorado state income tax rate for payroll in 2026?
Colorado's flat state income tax rate is 4.4% for 2026, as set by the Colorado Department of Revenue. No brackets — the math is identical for every employee at every income level.
Do small businesses with fewer than 10 employees have to pay FAMLI?
Yes — but only the employee share. Employers with fewer than 10 employees must withhold and remit the employee's 0.45% FAMLI contribution but are exempt from the employer's matching 0.45%. Registration with MyFAMLI+ Employer is still required and quarterly filing still applies.
How often do Colorado employers remit payroll taxes?
State income tax withholding frequency depends on your total liability — most small employers remit monthly or quarterly through Revenue Online. FAMLI premiums go to MyFAMLI+ Employer quarterly. Colorado unemployment (UITR) is also filed and paid quarterly.
What forms do Colorado employers file for payroll taxes?
For state income tax withholding, employers file the DR 1094 (wage withholding return) through Revenue Online. FAMLI is reported via the MyFAMLI+ Employer portal. Unemployment contributions go through CDLE's SUTS system using the UITR-1 return — all quarterly for most small employers.
Colorado payroll isn't complex. It has one extra piece — FAMLI — that most out-of-state resources and entry-level payroll tools quietly skip. Lock in all three obligations — income tax withholding, FAMLI, unemployment — and you're running a clean, compliant payroll from day one.
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