Most of what changes for a tradesperson in Colorado is set by the state, not Washington: how you get paid, whether you need to register, and what you owe in tax. Here is what actually differs, and where to run your own numbers.
Each section below points to a tool that runs your exact numbers for Colorado.
Tax in Colorado
Colorado has a flat 4.4% state income tax on top of your federal taxes. A flat rate makes the math simple: the same percentage applies whatever you earn. You still owe federal income tax and self-employment tax on your profit as well, and you make estimated payments to both the state and the IRS through the year.
On sales tax in Colorado, whether you charge tax depends on how you contract. A lump-sum price is treated as consumer, so you pay tax on your materials at purchase and charge the customer nothing extra; a time-and-materials price is treated as retailer, so you collect the tax from the customer. Confirm it for your kind of job before you quote.
Work out what to hold back on the Tax Set-Aside Calculator, which runs the federal and self-employment numbers for Colorado.
Getting paid: liens and retainage
A mechanic's lien is the tool that actually gets a Colorado contractor paid, and in Colorado you generally have to record it within 4 months of your last day of work. Miss it and you lose the lien, so the dates matter.
Enforcing it has its own clock. 6 months from your last day of work, or from completion of the improvement. Work out your dates on the Lien Deadline tool, and if they are close, get an attorney to confirm them against the statute (C.R.S. §§38-22-109(3), (4), (5), 38-22-110).
On money held back as retainage, here is where Colorado lands:
- Private work: 5% of the price of the work completed under the contract or subcontract where the contract, subcontract or supply agreement price is at least $150,000, and it is not a single-family dwelling or a multifamily dwelling of no more than four units, and the owner is not a public entity.
- Public work: 5% of the calculated value of completed work where the awarding public entity's contract exceeds $150,000; state, county, city and county, town and district agencies are all covered on the same terms, highways included. 3% of the value of the completed work, excluding mobilization and payments for materials on hand.
- Release: Private: no number of days is set at all. It falls due on whatever the contract says. Public: 60 days (the statute does not say whether these are calendar or business days) from the contract is completed satisfactorily and finally accepted by the public entity.
- Prompt pay: On public work a contractor must pay each subcontractor within 7 calendar days of being paid. Late payment down the chain carries the contract rate or 15% a year, whichever is higher.
Check the size of the job before you check the percentage. Colorado's cap does not reach every contract. The condition on it, in the statute's own terms: the contract, subcontract or supply agreement price is at least $150,000, and it is not a single-family dwelling or a multifamily dwelling of no more than four units, and the owner is not a public entity.
Check the Retainage Calculator before you sign a contract that holds back more.
Free Colorado retainage letters
Three letters written for Colorado's rules, with the state's own release clock and its statutory citation already in them. Fill one in on screen and download it as a PDF or a Word file.
- Retainage Release Request (Colorado), for when the job is done and the money has not come back
- Retainage Overdue: Demand for Payment (Colorado), for when the release date has passed and nothing has arrived
- Retainage Held Above the Cap: Challenge Letter (Colorado), for when more is being held than the state appears to permit
Do you need a license in Colorado?
Colorado has no statewide general contractor license, so for most building work there is no state license to get. That is one of the things that makes Colorado straightforward to start in. It does not mean no rules at all: the state still licenses specific trades like electrical and plumbing, and your city or county can require its own registration or permits, so always check locally before you take a job on.
Trade licenses for electrical, plumbing and HVAC are usually separate and often required even where a GC license is not. See what applies to your trade on the Contractor License Checker.
Building codes and permits
Colorado has no single statewide building code, so the edition you build to and whether you need a permit depend on your city or county. Do not assume the town next door adopted the same code or the same amendments.
- Homes: none statewide for site-built homes; each city and county adopts its own, currently 2015 to 2021. The Division of Housing's 2018 IRC reaches factory-built structures and no-code areas only
- Electrical: 2026 (approved 27 May 2026, effective 1 August 2026, superseding the 2023 edition)
- Energy: no direct adoption; the Model Low Energy and Carbon Code, built on a modified 2024 IECC, became the statewide minimum floor on 1 July 2026
- Plumbing: 2021 IPC (published as the Colorado Plumbing Code)
Colorado splits its codes three ways and only two of them are statewide. There is no statewide building code for privately owned homes: your city or county decides, and the Office of the State Architect says so directly. Electrical and plumbing ARE statewide, set by the DORA licensing boards, and a local authority may go stricter but not weaker. Energy is different again: it is a floor that binds a jurisdiction only when it next updates any building code, not a code that switches on by calendar. Note also that where the energy code and the Colorado Plumbing Code conflict, C.R.S. §12-155-106(4.5) gives the plumbing code priority.
Source: Office of the State Architect (no statewide building code); 8 CCR 1302-14 (Division of Housing, factory-built); Colorado State Electrical Board under C.R.S. §12-115-107(2)(a) and 3 CCR 710-1; Colorado Energy Office Model Low Energy and Carbon Code under HB22-1362; Colorado State Plumbing Board, 3 CCR 720-1 under C.R.S. §12-155-106. We have not yet read this row against Colorado's own adopting authority, so confirm the edition locally before you rely on it.
Check a specific job on the permit tool.
Pay and workers' comp
The minimum wage in Colorado is $15.16 an hour. CPI-indexed; Denver is higher ($18.29). The Denver figure is not verified against Denver and is indicative only. That is the floor for anyone you put on the books, and it is worth confirming against the state labor department each year because several states step their rate mid-year. Check a rate on the minimum-wage tool.
Workers' comp rates in Colorado are not published as a single figure; they turn on your trade's class code and your payroll. Get a realistic range on the Workers' Comp Estimator, then get a real quote.
If a client will not pay
If a client will not pay, you can sue for up to $7,500 in Colorado's County Court, Small Claims Division and lawyers are restricted, so it stays fairly informal. That covers most unpaid-invoice disputes for a small outfit; a bigger claim goes to regular civil court where you will probably want an attorney. Walk through whether filing is worth it on the Small Claims checker.
The clock runs the other way too: a client generally has 3 years to sue you over the work under a written contract in Colorado, with an absolute cutoff 6 years after the job is substantially complete. Work out your exposure on the Warranty & Claim Deadline tool.
Common questions
How much state income tax will I pay in Colorado?
Colorado has a flat 4.4% state income tax on your profit, on top of federal income tax and self-employment tax. Use the Tax Set-Aside Calculator to see what to hold back.
Do I need a contractor's license in Colorado?
For most general building work, no. Colorado has no statewide general contractor license. The state still licenses specific trades and your city or county may require its own registration, so check both.
What is the small claims limit in Colorado?
You can sue for up to $7,500 in Colorado's County Court, Small Claims Division. The filing fee is typically $31 to $55. Larger claims go to regular civil court.
How long do I have to file a mechanic's lien in Colorado?
Generally 4 months from your last day of work. Miss it and you lose the lien. Work your own dates out on the Lien Deadline tool.
How much retainage can be held back in Colorado?
Private: 5% of the price of the work completed under the contract or subcontract where the contract, subcontract or supply agreement price is at least $150,000, and it is not a single-family dwelling or a multifamily dwelling of no more than four units, and the owner is not a public entity. Public: 5% of the calculated value of completed work where the awarding public entity's contract exceeds $150,000; state, county, city and county, town and district agencies are all covered on the same terms, highways included. Public, transportation: 3% of the value of the completed work, excluding mobilization and payments for materials on hand. Run your own figure on the Retainage Calculator.
Are there free Colorado contract and payment forms?
Yes. This page links 3 retainage letters written to Colorado's own release clock and carrying its statutory citation. They are free, there is no sign-up, and you fill one in on screen and download it as a PDF or a Word file.
What is the minimum wage in Colorado?
$15.16 an hour in Colorado, above the federal $7.25. Several states step their rate mid-year, so confirm it before you set a payroll.
The honest bit
These are the 2026 rules for Colorado as they stood when this guide was written, and they change: legislatures move thresholds, deadlines and rates every year. Treat this as general guidance to point you in the right direction, not legal, tax or financial advice. Verify anything you rely on at the source (the IRS, the Colorado tax and licensing agencies, and your local building department) or with a professional. Where Colorado does something unusual, the detail is called out above rather than glossed over.
Related: Tax Set-Aside Calculator · Mechanic's Lien Deadline · Contractor License Checker · Small Claims checker · Working in Your State
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