Colorado · LLC tax election
Colorado LLC: S corp or C corp?
Colorado's rates are flat, so the answer depends on how much profit you actually pull out.
See Colorado at a glanceShort answer
In Colorado an S election removes the corporate tax. A valid S corporation is not subject to Colorado corporate income tax, and the shareholders pay Colorado income tax on the income. A C corp pays the corporate rate, 4.4% for 2025, and then you pay personal tax on dividends.
Last checked .Colorado at a glance
What is different about Colorado?
Colorado keeps its rules short. The Department of Revenue says any corporation or entity with a valid S election is not subject to Colorado corporate income tax, and the shareholders are liable in their individual capacities for the Colorado income tax on the income. The C corporation side is just as plain: a flat corporate rate that the state lists as 4.4% for tax year 2025, after 4.25% in 2024. Colorado does move this rate from year to year, so check the year you file. Colorado also offers an entity-level election through its SALT Parity Act, which lets an S corp pay tax at the entity level so owners can deduct it federally.
Does Colorado recognize a federal S corp election?
Colorado treats a valid S corporation as exempt from corporate income tax, and its shareholders are liable for the Colorado income tax on the income produced by the S corporation. The S corporation files Colorado Form DR 0106, the Partnership and S Corporation Income Tax Return. Under the SALT Parity Act, an S corporation can elect to pay Colorado income tax at the entity level instead, so owners can claim a federal deduction for state taxes above the individual limit.
Does my LLC need a separate Colorado election or form?
Colorado follows the federal S election; the S corporation files Form DR 0106, the Colorado Partnership and S Corporation Income Tax Return.2
What does Colorado tax an S corp or LLC at the entity level?
- A Colorado S corporation owes no corporate income tax; shareholders are liable individually.3
Is a Colorado LLC taxed as a C corp ever better?
A Colorado C corporation pays a flat corporate income tax rate, listed as 4.4% for tax year 2025 (it was 4.25% for 2024). The rate can be reduced in a year when state revenue passes the constitutional limit. Dividends are taxed again on your personal return at Colorado's individual rate, which the Department lists as 4.4% for 2025. That double layer is the cost of the C corp route.
Run your Colorado numbers
In Colorado the S election pays when your profit is high enough that skipping the 4.4% corporate layer and some payroll tax outweighs payroll and filing costs. Colorado's corporate and individual rates are close to each other, so the savings are modest. The SALT Parity election can add a federal benefit.
Result
How much would a Colorado LLC owner save as an S corp?
| Taxed as | At $80,000 profit | At $150,000 profit |
|---|---|---|
| Default LLC | $11,304self-employment tax $11,304 | $21,194self-employment tax $21,194 |
| S corp | $9,344payroll tax $7,344 + Colorado S corp tax $0 + $2,000 payroll and prep | $15,770payroll tax $13,770 + Colorado S corp tax $0 + $2,000 payroll and prep |
| C corp | $17,176payroll tax $7,344 + Colorado tax $1,408 + federal $6,424 + $2,000 payroll and prep | $30,456payroll tax $13,770 + Colorado tax $2,640 + federal $12,046 + $2,000 payroll and prep |
Assumes a 60% salary7 and a single filer. Income tax is left out. C corp dividends are taxed again. We could not confirm on an official Colorado source whether a default LLC pays an entity-level tax, so none is shown.
When is the Form 2553 deadline for a Colorado LLC, and what if I miss it?
Late relief: federal steps, deadline guide.
What to do next
How to start one, or have us form it from $123.75.
Registered agent $74.25/yr, annual report.
LLC vs S corp guide, election deadline, Form 2553 filed for $165.
More on Colorado: How to start a Colorado LLC · How to start a Colorado corporation · Colorado LLC cost · Colorado annual report · Annual report late fees by state
File the S-Corp Election for your Colorado LLC
We file Form 2553 for a flat $165.
Get the S-Corp ElectionCommon questions
Does Colorado tax S corporations?
Not at the corporate level. The Department of Revenue says a corporation with a valid S election is not subject to Colorado corporate income tax, and the shareholders are liable individually.
What is the Colorado corporate income tax rate?
The Department lists 4.4% for tax year 2025 and 4.25% for 2024. It lists no 2026 rate yet.
What is the Colorado SALT Parity Act election?
It lets partnerships and S corporations make an annual election to be subject to Colorado income tax at the entity level, so owners can claim a federal deduction for state income taxes above the individual limit.
Which Colorado form does an S corporation file?
Form DR 0106, the Colorado Partnership and S Corporation Income Tax Return.
Does Colorado tax individual income?
Yes, on modified federal taxable income. The rate varies by tax year, and the Department lists 4.4% for tax year 2025.
Sources 8 links, checked Nov 6, 2026
- Colorado does not tax a valid S corporation at the corporate level; its shareholders owe Colorado income tax on the S corporation's income. tax.colorado.gov, checked Nov 6, 2026
- Colorado follows the federal S election; the S corporation files Form DR 0106, the Colorado Partnership and S Corporation Income Tax Return. tax.colorado.gov, checked Nov 6, 2026
- A Colorado S corporation owes no corporate income tax; shareholders are liable individually. tax.colorado.gov, checked Nov 6, 2026
- A Colorado C corporation pays a corporate rate that the Department lists as 4.4% for tax year 2025 (4.25% for 2024). tax.colorado.gov, checked Nov 6, 2026
- Colorado taxes individual income at a rate that varies by tax year; the Department lists 4.4% for tax year 2025. tax.colorado.gov, checked Nov 6, 2026
- IRS: Form 1120 instructions, C corp rate irs.gov, checked Nov 6, 2026
- IRS: S corp reasonable compensation irs.gov, checked Nov 6, 2026
- IRS: Form 2553 instructions irs.gov, checked Nov 6, 2026
Last verified Nov 6, 2026.
This page explains the rules; it is not tax advice. Run your numbers with a CPA or enrolled agent before you elect.
Last verified Nov 6, 2026.