Colorado taxes capital gains as ordinary income — up to 4.4% — stacked on top of federal tax, so selling appreciated real estate can cost roughly ~28.2% of the gain. A 1031 exchange into a Delaware Statutory Trust lets Colorado investors defer that combined bill and trade active landlording for passive institutional real estate.
The Colorado tax math
Here's the tax stack on a long-held rental sold for a $1.5M gain (excludes depreciation recapture, taxed separately at up to 25%):
| On a $1.5M gain | Tax |
|---|---|
| Federal long-term capital gains (20%) | $300,000 |
| Net investment income tax (3.8%) | $57,000 |
| Colorado income tax (4.4%) | $66,000 |
| Total if you simply sell | $423,000 |
| Tax if you 1031 into a DST | $0 deferred |
In Colorado's top bracket, roughly the combined rate above goes to tax if you sell outright — versus $0 now with a qualifying 1031 exchange. Run your Colorado numbers →
Colorado 1031 rules
Rules summarized as of 2026 — verify with your tax advisor.
Conforms to federal §1031
Colorado conforms to IRC §1031, so a qualifying exchange defers Colorado tax as well as federal tax.
Withholding at sale
Colorado may require nonresident withholding at closing; a qualifying 1031 exchange generally defers it. Confirm specifics with your closing agent.
How gains are taxed
Taxed as ordinary income — up to 4.4%.
Colorado market snapshot
Illustrative — wire to a market-data feed; refreshed quarterly.
Baker 1031 in Colorado
Realized (acquired, held, sold) programs on Colorado assets. Joined from full-cycle-deals.csv; sponsor-reported, net-to-investor, not independently verified; past performance ≠ future results.
| Program | Sponsor | Avg annual | Equity × | Hold |
|---|---|---|---|---|
| Applebee's — Aurora | AEI | 9.98% | 2.20x | 11.89 yr |
| Villager Square LLC — Littleton | Time Equities | 17.21% | 3.19x | 9.56 yr |
| Curtis Hotel — Denver | Syndicated Equities | 14.16% | 1.44x | 2.75 yr |
| Walgreens — Pueblo | Syndicated Equities | 6.92% | 1.96x | 10.06 yr |
| Fuddruckers — Thornton | AEI | 8.88% | 1.24x | 10.66 yr |
| Carino's — Lakewood | AEI | 6.26% | 1.33x | 14.12 yr |
| KinderCare / Children's World — Colorado Springs | AEI | 7.96% | 2.05x | 15.31 yr |
| KinderCare / Children's World — Monument | AEI | 7.33% | 1.35x | 12.47 yr |
See every Colorado deal in the Data Center →
Current offerings for Colorado investors
| Offering | Sponsor | Type | Status |
|---|---|---|---|
| Colorado Growth 1 - Holly Ridge DST | Walton Global Holdings | Land | Available |
DST sponsors based in Colorado
Learn more
Colorado FAQ
What is the capital gains tax rate in Colorado?
Colorado taxes capital gains as ordinary income, up to 4.4%, with no separate long-term rate. Combined with the federal 20% rate and the 3.8% net investment income tax, a high-bracket Colorado seller can face roughly ~28.2% on a real estate gain.
Does Colorado recognize 1031 exchanges?
Yes. Colorado conforms to IRC §1031, so a properly structured exchange defers Colorado tax as well as federal tax.
Why use a 1031 exchange in Colorado?
To defer the tax on a large gain (up to about ~28.2% combined) and move from active landlording into passive, professionally managed real estate while keeping your full equity invested. These are Regulation D offerings for accredited investors.
Disclosures
This page is educational and is not investment, tax, or legal advice, or an offer to sell or a solicitation to buy any security. State tax and 1031 rules summarized here are general, current as of 2026, and not tax advice — verify with your CPA and attorney. For accredited investors only. Representatives may transact business only in states where registered or exempt. Securities offered through Aurora Securities, Inc., member FINRA/SIPC; Baker 1031 Investments, LLC is independent of Aurora. Performance shown is sponsor-reported, realized programs only, net of fees, not independently verified, and not indicative of future results.