The short answer
Colorado taxes gain on Colorado real estate at its flat income tax rate (4.40% by statute) and computes that tax from federal taxable income, so a completed exchange defers Colorado tax along with federal tax. Nonresident sellers face a 2% closing-table withholding unless they sign the DR 1083 affirmation that no Colorado tax is reasonably estimated to be due. The state documentary fee is one cent per $100, a few home-rule resort towns add their own transfer taxes, and Colorado has no rule that tracks deferred gain after you exchange into out-of-state property.
Colorado at a glance
| State tax on real estate gains | Flat 4.40% by statute; TABOR cut it to 4.25% for 2024, and 4.40% is listed for 2025 |
|---|---|
| Nonresident withholding | Lesser of 2% of the sales price or net proceeds, when the price exceeds $100,000 |
| Exchange exemption form | DR 1083 'Affirmation of No Reasonably Estimated Tax to be Due', signed at closing |
| Deferred-gain tracking | None; no Colorado equivalent of California's annual form FTB 3840 |
| State documentary fee | $0.01 per $100 of consideration over $500 (about $100 on a $1,000,000 sale) |
| Local transfer taxes | Aspen 1.5%, paid by the purchaser; TABOR bars any new or increased transfer tax |
| Capital gain subtraction | Since 2022 limited to Schedule F farmers selling Colorado agricultural land |
| 2026 assessment rates | Commercial improved 25%, vacant land 26%, residential 6.8% (7.05% for schools) |
The DR 1083 affirmation replaces Colorado's 2% withholding in a full exchange
If you are not a Colorado resident and you sell Colorado real property for more than $100,000, the title company must withhold the lesser of 2% of the sales price or your net proceeds and send it to the Department of Revenue on form DR 1079 within 30 days of closing. A fully deferred exchange avoids this by signature: the DR 1083 includes an 'Affirmation of No Reasonably Estimated Tax to be Due,' signed under penalty of perjury, stating that no Colorado income tax is reasonably estimated to be due on the gain.
The affirmation has to be executed before funds are disbursed, because the withholding agent is the closer, not you. Tell the title company early that the sale is part of an exchange and that proceeds go to your qualified intermediary, so the DR 1083 is prepared with the correct box checked on line 12.
Colorado residents sign a different affirmation on the same form, the Affirmation of Colorado Residency, and are never subject to the withholding. Corporations with a permanent place of business in Colorado and partnerships that file a federal partnership return are also exempt, but the Department's instructions treat a married couple selling jointly as two individuals, not a partnership.
- Threshold: withholding and DR 1083 reporting apply only when the sales price exceeds $100,000.
- Amount: the lesser of 2% of the selling price or the net proceeds shown on the settlement statement.
- Filing: DR 1083 goes to the Department within 30 days of closing whenever tax was withheld or an affirmation was signed.
Colorado's flat rate and the TABOR wobble: what a recognized gain would cost
Colorado has one income tax rate for everyone, and it applies to the whole recognized gain, depreciation recapture included, because Colorado taxable income starts from federal taxable income. The statutory rate is 4.40%, and the Department's published table shows 4.40% for tax year 2025; for tax year 2024 a TABOR surplus temporarily cut it to 4.25% under section 39-22-627, C.R.S.
On a hypothetical $600,000 gain from a Denver fourplex, that is roughly $26,400 of Colorado tax at 4.40% if you simply sold, on top of the federal bill. Because the deferral flows straight from the federal return, a properly completed exchange removes the Colorado tax along with the federal tax; the mechanics of the exchange itself are the same as anywhere else.
The Colorado capital gain subtraction will not rescue an ordinary investor who chooses to cash out instead. Since tax year 2022 it is available only to taxpayers who file IRS Schedule F, only for Colorado land classified as agricultural for property tax purposes, only if the land was acquired before June 4, 2009, and only after five uninterrupted years of ownership.
A one-cent documentary fee, but resort towns collect real transfer taxes
Colorado's state documentary fee is one cent per $100 of consideration on deeds where the price exceeds $500, so a $1,000,000 sale generates a $100 fee at the county clerk and recorder. Exchanging rather than selling changes nothing here, because the fee is triggered by the recorded deed, not by how the gain is treated.
The real transfer-tax exposure in Colorado is municipal. The City of Aspen collects a 1.5% real estate transfer tax on free-market conveyances, made up of a 0.5% Wheeler Opera House levy approved in 1978 and a 1.0% housing levy approved in 1989 that excludes the first $100,000 of consideration, and Aspen's code places the tax on the purchasing party.
These levies survive because they predate the Taxpayer's Bill of Rights, which now provides that 'new or increased transfer tax rates on real property are prohibited.' No Colorado town can add one, so the roster of resort communities with a transfer tax is closed; if your relinquished or replacement property sits in one, budget for it.
No claw-back: Colorado stops tracking deferred gain once the exchange closes
Colorado has no statute or form that follows deferred gain after an exchange. California requires exchangers who move gain out of state to file form FTB 3840 every year 'until the California sourced deferred gain or loss is recognized'; Colorado asks for nothing comparable, and the DR 1083 affirmation at closing is the last Colorado paperwork tied to the relinquished property.
A Colorado resident, of course, keeps reporting income from all sources to Colorado for as long as they remain a resident, so the deferral resurfaces only if you cash out of the replacement property while still domiciled in Colorado. A nonresident who exchanges out of Colorado into property elsewhere generally has no further Colorado filing for that property.
Colorado property tax after an exchange: odd-year revaluation, not a sale reset
Colorado assessors revalue real property every odd-numbered year on a statewide cycle, so a sale or exchange does not itself reset the assessed value the way Florida's caps do. The buyer of your Colorado property inherits the current valuation until the next reappraisal, and the price paid becomes one comparable sale among many.
What matters more for an investor is the assessment rate by class. For 2026 the rates are 25% for improved commercial property, 26% for vacant land and industrial property, 25% for agricultural land, and 6.8% for residential property (7.05% for school district levies), so a change of use on the replacement side can move the tax bill more than the change of ownership does.
Replacement property
Exchanging Colorado property for a DST: what the state taxes afterward
A Delaware Statutory Trust interest qualifies as replacement property under federal law, and because Colorado starts from federal taxable income, the deferral carries into your Colorado return without a separate election. The DR 1083 affirmation covers a DST closing just as it covers a direct purchase, provided the whole gain is deferred.
Most DST portfolios hold property outside Colorado, and rental income and eventual sale gain are generally claimed first by the state in which each building stands. A Colorado resident reports that income to Colorado as well and claims Colorado's credit for tax paid to another state, which the Department describes in its Individual Income Tax Guide, so the practical outcome is usually paying the higher of the two states' rates rather than both in full.
If the DST holds Colorado property, a nonresident investor picks up Colorado-source income and files as a nonresident, at the same flat rate. Breakwater Exchange, whose DST placements over twenty years exceed a billion dollars, works with vetted national sponsors and holds licensing in all fifty states through a regulated broker-dealer; which states will tax a particular offering is a question to settle with your CPA before the 45-day identification window closes.
Questions investors ask about 1031 exchanges in Colorado
Do Colorado residents have to deal with the DR 1083 at all?
Yes, but only to sign the Affirmation of Colorado Residency on the form; the 2% withholding applies to transferors whose Form 1099-S or disbursement authorization shows a non-Colorado address. A resident owes Colorado tax on any recognized gain through the regular DR 0104 return instead.
What happens to Colorado withholding if my exchange has boot?
The affirmation states that no Colorado tax is reasonably estimated to be due, so if boot will produce a Colorado tax bill a nonresident cannot sign it truthfully. The title company then withholds the lesser of 2% of the sales price or the net proceeds, and you recover any excess when you file your Colorado nonresident return.
Does buying replacement property in Aspen through an exchange avoid the city transfer tax?
No. Aspen's ordinances place the 1.5% real estate transfer tax on the purchasing party regardless of how the buyer treats the gain federally, though the 1.0% housing component excludes the first $100,000 of consideration.
Will a TABOR refund lower the rate on gain I recognize in 2026?
Only if the state certifies a surplus large enough to trigger the temporary rate reduction in section 39-22-627, C.R.S., as it did when the 2024 rate dropped to 4.25%. Plan around the 4.40% statutory rate and treat any reduction as a bonus, and confirm the certified rate with your CPA or the Department of Revenue when you file.
If my DST owns apartments in Texas, does Colorado still tax the income?
As a Colorado resident, yes, because Colorado taxes residents on income from all sources; Texas has no personal income tax, so there would be no other-state credit to claim. A DST with property in a taxing state changes that math, which is why the sponsor's state-by-state tax summary belongs in your CPA's hands.
Sources
The rules above were checked against these publications on September 18, 2026. Rates and forms change; confirm the current version with your CPA and the Colorado tax agency before you close. This page is general information, not tax or legal advice.
- Colorado Department of Revenue, Form DR 1083 and instructions (2025)
- Colorado Department of Revenue, Individual Income Tax Guide (rates by tax year, residency, credit for tax paid to another state)
- Colorado Department of Revenue, Income Tax Topics: Colorado Capital Gain Subtraction
- Boulder County Clerk and Recorder, recording fees (state documentary fee)
- City of Aspen, Real Estate Transfer Taxes
- Colorado Constitution, Article X, Section 20(8)(a) (Office of Legislative Legal Services, C.R.S. Title 00)
- Arapahoe County Assessor, Understanding Property Taxes in Colorado 2026 (assessment rates, revaluation cycle)
- California Franchise Tax Board, 2024 Instructions for Form FTB 3840 (comparison only)