Colorado won't offer tax break on overtime pay

Colorado will enforce a 4. 4% income tax on overtime pay, defying a federal exemption proposed by President Trump. Lawmakers decided to decouple from federal law starting in 2027, prioritizing state revenue preservation. State legislative analysts confirmed that this tax applies despite any federal changes. Rep.

Lorena Garcia, a key Democratic sponsor of the tax bill, stressed the importance of protecting Colorado's financial interests. The federal exemption for overtime applies only to hourly workers owed time-and-a-half pay, leaving salaried employees ineligible. If Trump passes a law exempting taxes on tips, Colorado will likely adopt similar measures unless future legislative changes occur. This decision indicates a significant shift in Colorado's approach to tax policy, as the state usually aligns with federal standards. The implications of this decoupling could affect many workers in the state as they navigate their tax obligations.