State guide · Colorado · 2026 rules

S corporation in Colorado: what the election changes

Colorado puts no tax on an S corporation. The election moves your pay onto payroll, where unemployment insurance, FAMLI and some city taxes apply.

Updated October 24, 202612 official sources

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You’ll need: last year’s Schedule C (line 31) and the W-2 from any job you also hold. Everything else starts at a typical value you can change.

State where the business is Each state treats the election differently. The check shows only the questions that matter there.

Net profit for the year, before paying yourself Your business's profit after expenses. Money you take out for yourself does not lower it.

Where do I find this?

Schedule C, line 31 (“Net profit or (loss)”) on last year’s return.

For this year: sales minus business expenses so far, scaled to a full year. Owner draws are not an expense.

Salary you would pay yourself as an S corporation What you would pay yourself through payroll. The IRS expects a reasonable salary for the work you do.

Where do I find this?

No form shows this yet: you choose it. It should be about what you would pay someone else to do your work.

The salary finder just below shows what employees in your job earn in your state or metro area. What the IRS looks at.

Salary finder: what people in your job earn (BLS)

Your job Pick the job closest to what you do most of the week.

Area Pick your metro area if it is listed. Pay varies by area.

Another job I also earn W-2 wages from a job outside this business

Typical values: change them if you know yours

Payroll service, per year typical value Published one-person prices: $492 to $684 a year (October 2026).

Where do I find this?

Your payroll provider’s price page or quote, for one employee: you. Published prices compared.

Extra tax-prep cost for the S-corp return typical value A survey average: the fee for Form 1120-S minus the fee for Schedule C (2020 fees).

Where do I find this?

Ask your preparer what a Form 1120-S (the S corporation’s own return) would cost, then subtract what you pay now for Schedule C.

Your top federal income tax rate Not sure? Keep 22%. It changes line 5 only.

Where do I find this?

Your taxable income is on Form 1040, line 15. Find the rate for that income and your filing status in the IRS rates and brackets table.

Filing status Changes the result only above $200,000 of earnings ($250,000 if married filing jointly, $125,000 if married filing separately).

Where do I find this?

The box checked under Filing Status at the top of your Form 1040.

Choose a state and enter your profit and salary to see the comparison.

The state

Colorado follows the federal S election with no state form. The S corporation files Colorado Form DR 0106 and owes no Colorado income or franchise tax. You pay Colorado income tax on its income at 4.4% for 2026, as you do today on your profit.

The Secretary of State’s periodic report fee is $25 for every type of entity, so it does not change when your LLC elects.

Payroll taxes on your salary

Unemployment insurance: 3.05% for a new non-construction employer on the first $30,600 of wages in 2026. That rate is a 1.53% beginning rate, a 0.17% support surcharge and a 1.35% solvency surcharge.

The labor department covers an officer of an LLC that reports to the IRS as a corporation. The statute’s text excludes LLC members. The calculator follows the department and includes the tax.

Paid Family and Medical Leave (FAMLI): 0.88% of wages, split 0.44% employer and 0.44% employee. With 9 or fewer employees, the business remits only the 0.44% employee share. A sole proprietor is outside FAMLI unless they opt in; an owner on payroll is inside it.

City occupational privilege taxes

Some Colorado cities charge a flat monthly tax per worker. In Denver a sole proprietor pays the $4 business tax each month ($48 a year). After the election the S corporation also withholds $5.75 from your pay in each month you earn $500 or more for Denver work ($117 a year in all).

Greenwood Village, Glendale and Sheridan work the same way: a salary above the city’s monthly threshold brings the employee portion too. Aurora repealed its tax from January 1, 2025.

The optional pass-through entity tax

A one-owner S corporation can elect Colorado’s SALT Parity Act tax, 4.4% for 2026, by checking a box on Form DR 0106 or by filing Form DR 1705. You get a credit for your share on your own return. The calculator leaves it out.

Worked examples

A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.

Profit / salary	No local tax	Denver	Greenwood Village	Glendale	Sheridan
$80,000 / $45,000	about even	about even	about even	about even	about even
$120,000 / $60,000	$2,303 lower	$2,255 lower	$2,288 lower	$2,264 lower	$2,244 lower
$200,000 / $90,000	$6,952 lower	$6,903 lower	$6,936 lower	$6,913 lower	$6,892 lower

Starting payroll in Colorado

Register for state withholding with the Department of Revenue through MyBizColorado, for unemployment insurance with the Colorado Department of Labor and Employment, and for FAMLI premiums with the FAMLI Division.

New hire paperwork for Colorado

Other states

All state guides and the map

Sources

Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An estimate from public rules, not tax advice.

Ready to elect? See the Form 2553 steps.

Electing S corp status