SB26-056 • 2026

State Overtime Compensation Income Tax

The bill modifies the requirement that a taxpayer add the amount of any overtime compensation excluded or deducted from the taxpayer's federal gross income back to the taxpayer's federal taxable incom

Taxes

Passed Legislature

This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.

Sponsor: Sen. B. Kirkmeyer, Rep. J. Caldwell
Last action: 2026-02-26
Official status: Senate Committee on State, Veterans, & Military Affairs Refer Unamended to Appropriations
Effective date: Not listed

Plain English Breakdown

The official source material does not provide information about repealing the modified rule after 2026. The note about a referendum petition is based on the provided bill text and applies if such a petition is filed.

State Overtime Compensation Income Tax

This bill modifies how Colorado calculates income tax for overtime pay, applying only to the year 2026.

What This Bill Does

Modifies the requirement that taxpayers add back any excluded or deducted overtime compensation from federal gross income when calculating state taxable income, but only for the 2026 tax year.

Who It Names or Affects

Taxpayers who receive overtime compensation and file state income taxes in Colorado.

Terms To Know

Overtime Compensation: Extra pay for working more than the standard work hours, which can affect how much tax a person pays.
Federal Gross Income: The total income before any deductions or exclusions are applied when calculating federal taxes.

Limits and Unknowns

This change only applies to the year 2026 and does not affect future years unless extended.
If a referendum petition is filed, this act may need approval from voters in November 2026 before it takes effect.

Bill History

2026-02-26 Senate
Senate Committee on State, Veterans, & Military Affairs Refer Unamended to Appropriations
2026-01-28 Senate
Introduced In Senate - Assigned to State, Veterans, & Military Affairs

Official Summary Text

The bill modifies the requirement that a taxpayer add the amount of any overtime compensation excluded or deducted from the taxpayer's federal gross income back to the taxpayer's federal taxable income for purposes of calculating state income tax liability to apply only in the 2026 income tax year.
(Note: This summary applies to this bill as introduced.)

Current Bill Text

Read the full stored bill text

Second Regular Session
Seventy-fifth General Assembly
STATE OF COLORADO
INTRODUCED

LLS NO. 26-0526.01 Alison Killen x4350 SENATE BILL 26-056
Senate Committees House Committees
State, Veterans, & Military Affairs
A BILL FOR AN ACT
CONCERNING MODIFYING THE STATE INCOME TAX ON OVERTIME101
COMPENSATION TO APPLY ONLY IN THE 2026 INCOME TAX YEAR.102
Bill Summary
(Note: This summary applies to this bill as introduced and does
not reflect any amendments that may be subsequently adopted. If this bill
passes third reading in the house of introduction, a bill summary that
applies to the reengrossed version of this bill will be available at
http://leg.colorado.gov.)
The bill modifies the requirement that a taxpayer add the amount
of any overtime compensation excluded or deducted from the taxpayer's
federal gross income back to the taxpayer's federal taxable income for
purposes of calculating state income tax liability to apply only in the 2026
income tax year.
SENATE SPONSORSHIP
Kirkmeyer,
HOUSE SPONSORSHIP
Caldwell,
Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
Capital letters or bold & italic numbers indicate new material to be added to existing law.
Dashes through the words or numbers indicate deletions from existing law.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. In Colorado Revised Statutes, 39-22-104, amend2
(3)(u) as follows:3
39-22-104. Income tax imposed on individuals, estates, and4
trusts - single rate - report - tax preference performance statement5
- legislative declaration - definitions - repeal.6
(3) There shall be added to the federal taxable income:7
(u) (I) FOR THE 2026 INCOME TAX YEAR ONLY, the amount of any8
overtime compensation excluded or deducted from federal gross income.9
(II) THIS SUBSECTION (3)(u) IS REPEALED, EFFECTIVE DECEMBER10
31, 2032.11
SECTION 2. Act subject to petition - effective date. (1) This12
act takes effect at 12:01 a.m. on the day following the expiration of the13
ninety-day period after final adjournment of the general assembly (August14
12, 2026, if adjournment sine die is on May 13, 2026); ex cept that, if a15
referendum petition is filed pursuant to section 1 (3) of article V of the16
state constitution against this act or an item, section, or part of this act17
within such period, then the act, item, section, or part will not take effect18
unless approved by the people at the general election to be held in19
November 2026 a nd, in such cas e, will take effect on the date of the20
official declaration of the vote thereon by the governor.21
SB26-056-2-