The Short Answer
Active-duty pay is taxed as regular income at Colorado's 4.40% flat rate, though federal combat-zone-excluded pay is also exempt and members living abroad 305+ days may file as nonresidents. Your base pay is set by the federal pay table — identical to every other state for your rank and years of service. What actually changes in Colorado is your BAH (averaging $1,600/mo without dependents and $2,000/mo with dependents) and how Colorado treats the taxable portion of your pay.
State tax status: ~ PARTIAL EXEMPT
2026 Worked Example — E-5, 6 Years, With Dependents in Colorado
Here is how the math actually lands for a mid-career enlisted member stationed in Colorado, built the way I read my own LES. Base pay and BAS are federal; the Colorado BAH figure is the state average.
| Monthly line item | Amount | Taxable? |
|---|---|---|
| Base pay (E-5, over 6 yrs) | $3,874 | Yes (federal + state) |
| BAH with dependents (Colorado avg) | $2,000 | No — tax-free |
| BAS (enlisted) | $476.95 | No — tax-free |
| Gross monthly entitlements | $6,350.95 | — |
| Taxable income (base pay only) | $3,874 | — |
| Est. Colorado state income tax | varies — see notes | — |
Only the $3,874 of base pay is taxable — the $2,476.95 of BAH + BAS is completely tax-free. Run your exact rank, ZIP, and dependency status in the Military Pay Calculator for a precise estimate.
How Colorado Taxes Each Type of Military Pay
Active-Duty Base Pay
Active-duty pay is taxed as regular income at Colorado's 4.40% flat rate, though federal combat-zone-excluded pay is also exempt and members living abroad 305+ days may file as nonresidents.
Guard & Reserve Drill Pay
Guard and Reserve drill pay is taxed as ordinary income subject to the same combat-zone exclusion.
Military Retirement Pay
Military retirement is partially exempt: up to $15,000 (under 55), $20,000 (ages 55-64), and $24,000 (65+); a separate younger-veteran subtraction may also apply.
VA Disability Compensation
VA disability compensation is exempt federally and is not taxed by Colorado.
SCRA & Residency in Colorado
A servicemember keeping legal residence elsewhere under SCRA pays no Colorado tax on military pay despite being stationed at Fort Carson or Peterson SFB.
This is the single most misunderstood rule in military pay. Your home of record / state of legal residence — not your duty station — generally determines who can tax your military pay. Changing it is a deliberate act, not something that happens automatically when you PCS.
Major Military Installations in Colorado
- Fort Carson
- Peterson Space Force Base
- Buckley Space Force Base
- U.S. Air Force Academy
BAH is set by the Military Housing Area covering your duty ZIP. Verify your exact rate at the official DoD BAH lookup.
Official Sources
FAQ — Military Pay in Colorado
Does Colorado tax my military base pay?
Active-duty pay is taxed as regular income at Colorado's 4.40% flat rate, though federal combat-zone-excluded pay is also exempt and members living abroad 305+ days may file as nonresidents.
Is my BAH taxed in Colorado?
No. BAH is federally tax-free and is never counted as income for Colorado state income tax, regardless of how Colorado treats base pay.
Does Colorado tax military retirement pay?
Military retirement is partially exempt: up to $15,000 (under 55), $20,000 (ages 55-64), and $24,000 (65+); a separate younger-veteran subtraction may also apply.
I'm stationed in Colorado but my home of record is elsewhere — who taxes me?
A servicemember keeping legal residence elsewhere under SCRA pays no Colorado tax on military pay despite being stationed at Fort Carson or Peterson SFB.