With Congress having passed the “One Big Beautiful Bill”, significant tax changes are about to take effect nationwide. One provision exempts overtime wages from federal income tax between 2025–2028, aiming to reduce tax burdens for middle-income workers.
However, Colorado has announced it will not conform to this federal exemption. This means that while taxpayers will see relief on their federal returns starting next year, overtime pay will remain fully taxable at the state level.
The enacted bill includes:
Colorado’s income tax system starts with federal AGI but allows lawmakers to “decouple” from specific federal changes. For overtime:
Colorado officials cited two main reasons for decoupling:
Bizora AI tracks state conformity decisions in real time, providing:
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