Colorado fully conforms to federal §168(k) bonus depreciation via rolling IRC adoption under C.R.S. §39-22-103. STR investors get 100% of the federal Year-1 deduction plus the full Colorado deduction at the 4.4% flat rate — no add-back required and no separate state depreciation schedule. On a $150,000 federal deduction, that's an additional $6,600 in Colorado state tax savings on top of $55,500 federal. Compare Colorado's treatment to every other US jurisdiction in the complete state-by-state conformity map.
Modeled on a $150,000 federal §168(k) deduction. Open the state conformity tool →
How Colorado Adopts §168(k) — The Rolling Conformity Mechanic
Colorado is a rolling conformity state. C.R.S. §39-22-103 defines Colorado taxable income by reference to the Internal Revenue Code as it exists at any given moment — not as of a fixed date. When federal law changes, Colorado's tax base changes with it automatically, unless the legislature affirmatively decouples from a specific provision.
Colorado has never decoupled from §168(k). When the One Big Beautiful Bill Act (OBBBA) restored 100% federal bonus depreciation for property acquired and placed in service after January 19, 2025, Colorado's rolling conformity flowed the entire deduction through to the state return automatically — no state legislation required.
The mechanic is straightforward. Compute federal taxable income with the full §168(k) deduction. Colorado taxable income inherits the deduction unchanged. Depreciation on the Colorado return matches federal exactly. Basis is identical. No separate Colorado depreciation schedule, no addition modification, no subtraction modification, no divergence at disposition. Colorado's 4.4% flat rate means the state savings scales linearly with the deduction.
Worked Example — $150,000 Federal Deduction Plus Extra Colorado Savings
Consider an investor buying a $1.5M ski-town STR in Breckenridge, Steamboat, or Crested Butte, running a cost seg-style analysis, and identifying $150,000 in 5-year and 15-year bonus-eligible property (kitchen finishes, appliances, FF&E, hot tub, outdoor deck, landscaping). The federal §168(k) deduction is $150,000 in Year 1 — and Colorado piggybacks the entire amount.
Assumptions: Federal marginal rate 37% · Colorado flat rate 4.4% · Bonus depreciation acquired and placed in service after January 19, 2025 · STR loophole (§469) qualification confirmed for federal purposes.
| Line | Federal return | Colorado return |
|---|---|---|
| §168(k) Year-1 deduction | $150,000 | $150,000 (full conformity) |
| Year-1 tax rate | 37% | 4.4% flat |
| Year-1 tax savings | $55,500 | $6,600 |
| Combined Year-1 savings | $62,100 | |
| Recovery mechanics | Full deduction in Year 1, both returns · basis matches | |
The Colorado $6,600 is extra state savings you'd miss out on in a decoupled state. Colorado's flat rate means the math is simple: 4.4% of every bonus-eligible dollar flows to Year-1 state tax savings.
The Statute Explained
Colorado's rolling conformity is stable across federal law changes. Because there's no fixed conformity date to track and no §168(k)-specific carve-out, investors can rely on the state benefit tracking whatever the federal government does with bonus depreciation. Colorado's flat 4.4% rate also means there's no bracket calculation to worry about — every deduction dollar produces the same state benefit.
How Colorado Compares to Decoupled States
Roughly half of US states plus DC decouple from §168(k). In a decoupled state, an STR investor with a $150,000 bonus deduction would add back 100% on the state return and lose the Year-1 state tax savings entirely. Colorado's rolling conformity is the mirror opposite. Consider the gap with Colorado's neighbors:
- Utah — full conformer at 4.5% → +$6,750 Year-1 state savings (similar to Colorado)
- New Mexico — full conformer at 5.9% top rate → up to +$8,850 Year-1 state savings
- Arizona — decoupled at 2.5% flat → $0 Year-1 state benefit (though low rate keeps the hit modest)
- Kentucky (comparison contrast) — decoupled at 3.5% flat → $0 Year-1 state benefit
Use the state conformity tool to compare Colorado against any other state at any federal deduction amount, or browse the full 50-state hub for a side-by-side view.
What This Means for Your STR Purchase Decision
Colorado's mountain STR markets — Breckenridge, Steamboat, Crested Butte, Vail, Estes Park — combine premium nightly rates with one of the friendliest state tax regimes for bonus depreciation in the Mountain West. Three practical implications:
- Federal $55,500 and Colorado $6,600 stack cleanly. On a $150,000 bonus-eligible deduction, combined Year-1 tax savings hit $62,100 — the state doesn't take back any of the federal acceleration.
- Tax prep is simpler. No separate Colorado depreciation schedule, no addition/subtraction modifications year-over-year, no basis divergence at sale. That saves preparer hours and reduces error risk.
- Rolling conformity gives you predictability. Federal law changes flow through automatically. If OBBBA-style acceleration continues, Colorado continues to benefit — no state legislative uncertainty.
Before you write an offer on a Breckenridge or Steamboat STR, run the address on your property — the report models the full federal Year-1 deduction and confirms Colorado's rolling conformity means you keep every dollar on the state return too.
Analyze a specific Colorado property
Run any Colorado STR listing through DepreciMax's $99 property report — line-item finish classification, federal §168(k) modeling, and Colorado full-conformity confirmation included.
Frequently asked questions
Does Colorado conform to federal §168(k) bonus depreciation in 2026?
Yes. Colorado fully conforms via rolling IRC adoption under C.R.S. §39-22-103. STR investors get the full federal Year-1 deduction plus the full Colorado deduction at 4.4% flat — no add-back required.
How much extra state tax savings does Colorado conformity produce for a short-term rental investor?
On a $150,000 federal §168(k) deduction, Colorado's 4.4% flat rate produces an additional $6,600 in Year-1 state savings on top of the federal $55,500. Combined Year-1 tax savings: about $62,100.
What is the Colorado statute for §168(k) conformity?
C.R.S. §39-22-103 provides rolling IRC conformity. §168(k) as restored by OBBBA flows through automatically.
Does Colorado conformity help the short-term rental loophole?
Yes. The federal STR loophole (§469) already lets you deduct rental losses against W-2 income at the federal level. Colorado's conformity means the same acceleration reduces Colorado taxable income too — producing an additional 4.4% state tax savings.
Is any add-back required on the Colorado return?
No. Rolling conformity means federal §168(k) flows through to Colorado with no modifications. Depreciation, basis, and disposition mechanics all match federal.
Did OBBBA affect Colorado's §168(k) treatment?
Yes, favorably. OBBBA (P.L. 119-21) restored 100% federal bonus depreciation for property acquired and placed in service after January 19, 2025. Colorado's rolling conformity flowed that restoration to the Colorado return automatically.
Every state's §168(k) position, in one place
Interactive map, sortable table, and deep-dive guide for each of the 51 jurisdictions — post-OBBBA verified.
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