If you’ve spent a winter in Colorado shoveling snow while a friend sends you a photo from their pool in Scottsdale, it’s natural to wonder whether you should be retiring somewhere else. Every year, a wave of Colorado retirees, often with substantial portfolios, concentrated equity positions, or large IRAs facing years of required minimum distributions, look seriously at Arizona, Florida, the Carolinas, or Las Vegas.
The answer is that some of these places genuinely do beat Colorado on certain numbers, mainly state income tax. But the full picture, once you add in property taxes, home prices, homeowners insurance costs, extreme summer heat, hurricane risk, healthcare access, and what you’d actually be giving up, is a lot more balanced than the headline “no income tax” pitch makes it sound, and the math depends heavily on the size and shape of your own portfolio. Here’s an even handed look at how Colorado stacks up.
Before any of the numbers below, though, here’s the question worth answering first: would you actually be happy living there? Living somewhere you don’t love to save a few thousand dollars a year in state tax is rarely a good trade, and for most retirees, the tax savings alone won’t outweigh months of hurricane season, brutal summer heat, or a place that just doesn’t feel like home. Taxes are one input into this decision. They shouldn’t be the only one.
Colorado’s tax picture, more favorable than most retirees assume
Colorado has a flat state income tax of 4.4%, and it’s more retirement friendly than its reputation suggests. Social Security is fully exempt from Colorado tax for residents 65 and older, with no income limit. For residents 55 to 64, Social Security is also fully exempt as long as adjusted gross income stays at or below $75,000 for single filers or $95,000 for joint filers. On top of that, retirees 65 and older can subtract up to $24,000 of pension and annuity income from their Colorado taxable income, and those 55 to 64 can subtract up to $20,000.
Property taxes are also low by national standards. Colorado’s average effective property tax rate runs around 0.5%, among the lowest in the country, and residents 65 and older who’ve owned their home for at least ten years can qualify for a senior homestead exemption that shields 50% of the first $200,000 of home value from property tax. Colorado has no estate tax and no inheritance tax.
None of this means Colorado is a no tax state. It isn’t. But for a retiree living primarily on Social Security and moderate pension or retirement account income, the effective state tax bill is often smaller than people expect, especially once the age based deductions are factored in.
Arizona
Arizona has a flat 2.5% income tax, the lowest flat rate among the states retirees typically compare against Colorado, and it does not tax Social Security benefits at all. Property taxes are also generally low. The tradeoff is climate on the opposite end of the spectrum: instead of cold winters, you get summer heat that regularly pushes well past 100 degrees for months at a time, which changes daily life and outdoor activity in ways that matter a lot to some retirees and not at all to others.
Housing costs in the Phoenix and Scottsdale areas have historically run comparable to or higher than Denver metro pricing in many neighborhoods, so the tax savings on the income side can be partially offset on the housing side, depending on where exactly you’re comparing.
Florida
Florida has no state income tax at all, which means no tax on Social Security, pensions, or retirement account withdrawals. It also has no estate tax. For retirees with substantial IRA or 401(k) balances facing years of required minimum distributions, this is a real and meaningful savings compared to Colorado.
The tradeoffs are less about tax and more about the rest of the cost of living picture. Florida’s property insurance market has become considerably more expensive and less predictable in coastal and hurricane exposed areas, and property taxes, while not sky high, run higher on average than Colorado’s. Humidity and hurricane season are also lifestyle factors that some retirees love and others actively avoid.
The Carolinas
North Carolina has a flat income tax that’s been dropping steadily, currently around 3.99% and scheduled to decline further in coming years, and the state exempts Social Security benefits. Other retirement income, including pensions and IRA withdrawals, is generally taxable, though North Carolina’s overall rate is competitive.
South Carolina exempts Social Security entirely and offers a retirement income deduction, though its top marginal rate on other income runs higher than Colorado’s flat rate for higher income retirees. South Carolina is often cited as a strong retiree destination because of the combination of the retirement income deduction, relatively low property taxes, and a lower overall cost of living in many parts of the state compared to Denver.
Both states offer a genuine four season climate, which is part of why the Charlotte, Asheville, and Greenville areas have become popular with Colorado retirees who want to trade elevation and dry winters for humidity and mild ones.
Las Vegas and Summerlin
Nevada has no state income tax, no estate tax, and no tax on Social Security, pensions, or retirement account withdrawals, similar to Florida. Las Vegas area home prices have generally tracked close to the national median, and the desert climate is a major draw for retirees who want warm, dry weather without Arizona’s most extreme summer heat.
The tradeoff again comes down to lifestyle fit rather than tax math. Summerlin and the broader Las Vegas valley offer a different day to day rhythm than the Front Range, with a stronger draw for people who want proximity to entertainment and an easy regional airport, and a weaker draw for people whose retirement plans center on hiking, mountain access, or four distinct seasons.
Texas
Texas has no state income tax and no estate tax, and the tax savings on a large IRA, pension, or brokerage withdrawal can be substantial for retirees with meaningful ordinary income. The Austin and Texas Hill Country areas in particular have drawn a steady stream of Colorado retirees over the past several years, along with a broader wave of relocations from higher tax states.
The tradeoff shows up on the property tax side. Texas relies heavily on property taxes to fund state and local government in the absence of an income tax, and effective rates commonly run 1.6% to 2% of assessed value, three to four times Colorado’s average rate. On a $700,000 home, that difference alone can run $8,000 to $10,000 a year, which eats into a meaningful chunk of the income tax savings for retirees with a paid off or lower valued home relative to their income.
Wyoming
Wyoming has no state income tax, no estate tax, and some of the lowest property taxes in the country, and it sits closer to Colorado than any other no tax state on this list. It’s also become a well known domicile for wealthier households for reasons beyond day to day living costs, including favorable trust and asset protection laws that make it attractive for estate planning purposes.
Climate is the real limiting factor here. Wyoming winters are at least as cold as Colorado’s, and the state doesn’t offer the warm weather draw that pulls most retirees toward Arizona, Florida, or Las Vegas. For that reason, Wyoming tends to appeal more to higher net worth households already comfortable with mountain winters who are motivated primarily by tax and estate planning, sometimes as a domicile change rather than a full lifestyle relocation, more than to retirees chasing a warmer climate.
Tennessee
Tennessee has no state income tax and no estate tax, and unlike some of its neighbors, it fully eliminated its old tax on interest and dividend income back in 2021, so investment income is entirely untaxed at the state level. Property taxes are moderate, generally lower than Colorado’s on a comparable home in most parts of the state. Nashville, Knoxville, and Chattanooga have all seen meaningful retiree in-migration in recent years.
Like the Carolinas, Tennessee offers a genuine four season climate rather than the desert or subtropical extremes of Arizona or Florida, with more humidity than Colorado but generally milder winters. It’s a reasonable middle ground for retirees who want to give up state income tax without fully committing to a hot, humid, or hurricane exposed climate.
What the tax comparison actually tells you
Taken purely on state income tax, Arizona, Florida, the Carolinas, Nevada, Texas, Wyoming, and Tennessee all have an edge over Colorado, though the size of that edge varies a lot depending on how much of it gets clawed back through property taxes, insurance costs, and other state and local taxes. But once you widen the lens to the full cost picture, and the deductions Colorado already offers retirees 55 and older, the gap narrows considerably for most households, and in some cases it’s smaller than the marketing pitch for these states suggests.
This is exactly the kind of comparison that benefits from actually running your numbers rather than relying on a general rule of thumb. A retiree drawing heavily from a large traditional IRA has a very different relocation calculus than one relying mostly on Social Security and a paid off home. A tax-efficient retirement income strategy built around your specific accounts and withdrawal order often matters more than which state you live in, and it’s worth modeling before treating a move as a foregone conclusion.
Where your retirement income actually comes from matters more than the state you live in
There’s a common assumption that high net worth retirees living mostly off a taxable brokerage account somehow sidestep the state tax question because their income comes from capital gains rather than a paycheck or a pension. It’s worth being precise about what’s true here and what isn’t.
It’s true that federal tax treats long term capital gains far more favorably than ordinary income. For 2026, long term gains are taxed federally at 0%, 15%, or 20% depending on total taxable income, compared to ordinary federal brackets that run as high as 37%. A married couple can realize up to $98,900 in long term gains in 2026 and pay 0% federal tax on that portion if it’s their only income. That’s a real and significant advantage, and it’s one reason a well built tax-efficient retirement income strategy pays close attention to which accounts you draw from and in what order.
Where the premise breaks down is the idea that this income has “nothing to do with state income tax.” In Colorado, and in most states that have an income tax, long term capital gains are not given any special break. Colorado taxes capital gains the same as any other income, at the flat 4.4% rate. So a retiree drawing $100,000 a year from a brokerage account in Colorado is still paying Colorado tax on that income, even though the federal government is taxing it at a much lower rate than it would tax the same amount of wages or IRA withdrawals.
What this means in practice: moving from Colorado to Florida, Nevada, or Texas does eliminate the state tax on brokerage account withdrawals, just as it would on any other income. But it doesn’t change the federal tax at all, since your federal capital gains rate is identical no matter which state you live in. And for many retirees whose income already qualifies for the 0% or 15% federal bracket, the state piece of the equation, while real, is often smaller in dollar terms than it would be for a retiree drawing the same amount from a traditional IRA or pension that gets no preferential rate at either level.
At what asset level does moving actually pay for itself
This is the question that rarely gets asked directly, and it’s worth running the math rather than assuming the answer.
The federal tax bill is the same wherever you live. It doesn’t change based on your address, and for most retirees it’s a considerably larger number than the state tax bill. State income tax is real, but it’s a smaller lever, and the size of that lever depends entirely on how much taxable ordinary income you have.
Take a retired couple in Colorado with a $1.5 to $2 million portfolio, drawing roughly $70,000 to $80,000 a year in taxable ordinary retirement income after accounting for the state’s Social Security exemption and pension deductions. At Colorado’s flat 4.4% rate, that’s roughly $3,000 to $3,500 a year in state tax. Selling a home, buying in a new state, paying closing costs and moving expenses, and dealing with a new insurance and property tax structure can easily run $30,000 to $60,000 or more in one time costs, before you even weigh in the emotional cost of leaving a place you know. At that income level, the payback period on a move made purely for tax reasons can stretch past a decade, and that’s before considering that many of these states have property taxes, insurance costs, or sales taxes that offset part of the income tax savings.
Now take a retired couple with a $5 million or larger portfolio, drawing $250,000 to $350,000 a year in taxable ordinary income, often the result of a career that included meaningful stock compensation, a large 401(k) or IRA now in RMD years, or a pension layered on top of significant investment income. Colorado tax on that income runs $11,000 to $15,000 a year, and every year that gap continues indefinitely. At that level, the math for a permanent move starts to make more sense on tax grounds alone, particularly for someone already facing a large, unavoidable RMD or a concentrated stock position that needs to be diversified through a series of taxable sales, though it’s still worth weighing against the rest of the picture.
The takeaway is that relocating purely to save on state income tax tends to make the most financial sense for households with enough taxable ordinary income, often tied to a larger IRA, pension, or a career that included significant equity compensation, that the annual state tax savings clears $10,000 to $15,000 or more. That’s roughly where the ongoing savings start to outweigh the one time cost and disruption of a move within a handful of years. Below that, the numbers alone rarely justify uprooting your life, and the decision comes down much more to whether you’d actually enjoy living somewhere else.
The option most retirees overlook: you don’t have to pick just one
Here’s something that rarely gets written about, and it’s worth sitting with. If you’re retired, financially independent, and don’t have a job tying you to one location, you’re one of the few people who genuinely gets to choose where you are based on the season.
If Colorado winters wear on you, you don’t have to sell your house and move permanently to Florida or Arizona to fix that. You can spend January and February somewhere warm and come home for the rest of the year, whether that’s a rental, a small second home, or simply an extended stay. This avoids most of what actually makes those other states hard to love full time: Florida’s hurricane season and homeowners insurance costs, Arizona’s brutal summer heat, or the humidity that wears on people who move to the Carolinas expecting a Colorado climate with better winters. You get the upside of each place in its best season and skip the downside in its worst one.
This approach also sidesteps the tax question almost entirely, since Colorado’s tax rules are based on domicile, not on how many weeks a year you happen to be sitting somewhere warm. For most retirees, especially those below the asset level where a permanent move meaningfully changes the math, splitting time seasonally captures most of the lifestyle benefit that people are really chasing when they start looking at Scottsdale or Naples listings, without the cost, hassle, and permanence of an actual relocation.
The tax and cost of living conversation tends to crowd out the other side of the ledger, which is what Colorado actually offers: a strong outdoor lifestyle across four real seasons, a major international airport, a deep and growing healthcare system, and proximity to family and friends for retirees who’ve spent decades building a life here. None of that shows up on a tax comparison chart, but it’s very real when you’re the one deciding whether to sell a paid off house and start over somewhere new.
For many Colorado retirees, especially those with sizable portfolios, concentrated stock positions, or multiple account types to draw from, the right answer isn’t relocating for tax savings alone. It’s building a retirement income pyramid that’s efficient enough on the Colorado side that the marginal tax savings from a move stop being the deciding factor, and the decision comes down to where you actually want to live.
If you’re weighing a retirement relocation and want a clear, numbers based look at what it would actually save you, and what it would cost you in other ways, that’s exactly the kind of analysis we walk clients with $1 million or more in investable assets through at Inclinevest. You can review our services and fee structure, learn more about why we work on a fee-only basis, or schedule a call to run your own numbers before you decide.
About Gabriel Motta, CFP®
Gabriel Motta, CFP®, MBA is the founder of Inclinevest. He is a Certified Financial Planner™ professional and a member of NAPFA and the XY Planning Network. As a fee-only fiduciary advisor serving Denver, Parker, Centennial, Greenwood Village, Highlands Ranch, Lone Tree, Littleton, and Castle Rock, as well as clients nationwide, he is committed to objective, client-first advice. If anything here raised questions about your own situation, feel free to reach out.
Sources
- AARP, “Colorado State Taxes: What You’ll Owe in 2026,” https://www.aarp.org/states/colorado/state-taxes-guide/
- Kiplinger, “Colorado Tax: Guide to Income, Sales, Property, and Retirement Taxes,” https://www.kiplinger.com/state-by-state-guide-taxes/colorado
- Kiplinger, “The 8 States That Tax Social Security Retirement Income in 2026,” https://www.kiplinger.com/taxes/states-that-tax-social-security-benefits
- Kiplinger, “Retirement Taxes: How All 50 States Tax Retirees,” https://www.kiplinger.com/retirement/602202/taxes-in-retirement-how-all-50-states-tax-retirees
- SmartAsset, “Best States to Retire for Taxes,” https://smartasset.com/retirement/retirement-taxes
- Redfin, “Las Vegas Housing Market: House Prices & Trends,” https://www.redfin.com/city/10201/NV/Las-Vegas/housing-market
- Kiplinger, “IRS Updates Capital Gains Tax Thresholds for 2026,” https://www.kiplinger.com/taxes/irs-updates-capital-gains-tax-thresholds
- CountryTaxCalc, “Colorado Tax: 4.4% Flat (TABOR Protected),” https://www.countrytaxcalc.com/tax-calculator/usa/colorado/
- Tax Foundation, “State Individual Income Tax Rates and Brackets,” https://taxfoundation.org/data/all/state/state-income-tax-rates/
- Tax Foundation, “Facts and Figures: How Does Your State Compare?,” https://taxfoundation.org/data/all/state/facts-figures/
This article is for general informational and educational purposes only. It isn’t personalized investment, tax, or legal advice, and it shouldn’t be relied on as a substitute for guidance specific to your situation. Inclinevest LLC is a registered investment adviser. Please consult a qualified professional before making decisions about your own financial circumstances.
