Colorado Short Term Rental Tax Overview
Colorado is one of the more complex states for taxes on short term rentals, and the taxes keep evolving. Short term rental owners deal with a flat state income tax, a 2.9% sales tax on lodging, county lodging taxes, local marketing district taxes, special district taxes, and home rule cities that collect their own taxes directly. The applicable taxes stack on top of each other and vary widely by jurisdiction, so two rental property owners a few miles apart can face very different combined rates, permits, and filing requirements. Rental property owners in resort counties carry the heaviest load.
Short term rentals in Colorado are taxed at every level of government, and this guide covers each layer of short term rental tax law: the lodging taxes you collect from guests on each reservation, the tax returns you file with the Colorado Department of Revenue, the permits and taxes home rule cities like Denver and Breckenridge require, and where property taxes on short term rentals are heading at the Colorado Capitol. If you are still choosing where to buy, our STR market data can help you compare markets before the tax math even starts. For licensing, zoning, and permit rules beyond taxes, see our companion guide to Colorado short term rental laws.
Colorado Sales Tax on Short Term Rentals
Colorado imposes a 2.9% state sales tax on accommodations, with short term rentals defined as stays of fewer than 30 consecutive days. Hotels, rooms in a private apartment, and whole houses all fall under the same rules when rented short term. The tax applies to the full price guests pay for the reservation, including cleaning fees. Long term rentals of 30 days or more do not qualify as taxable lodging sales, and business travelers on extended stays fall outside the definition too.
Before you collect a dollar from guests, every owner is required to obtain a sales tax license from the Colorado Department of Revenue. You can register online through the MyBizColorado portal or submit the Sales Tax / Wage Withholding Account Application (form CR 0100); the same application also lets you register for wage withholding if you employ cleaners or other staff. The application asks for basic information about the rental property, and the license number is assigned to the specific location, so an owner with short term rental properties in multiple cities needs a sales tax license site for each one. Once your sales tax license is active, you file the Retail Sales Tax Return (form DR 0100) for each assigned period. Your filing frequency (monthly, quarterly, or annual) is set by the state based on the amount of tax you collect and remit.
Two requirements trip up short term rental operators who are new to collecting these taxes:
Zero dollar returns are mandatory. You are required to file tax returns every period even if you generate no bookings and collect nothing. Skip a filing and the Colorado Department of Revenue will estimate a return on your behalf and bill you for it, with penalty, interest, and late fees added. A five-minute filing in a slow month costs nothing; estimated assessments are painful to unwind.
Platform collection does not cover everything. Airbnb and Vrbo collect and remit state-administered taxes on your behalf for bookings made through their platforms (Colorado treats the platforms as marketplace facilitators), and those marketplace sales are reported as deductions on your DR 0100 so you never pay twice. But platform collection does not cover home rule city taxes in many jurisdictions, and it never covers direct bookings. If guests book through your own website, you collect and remit the entire amount yourself, including any deposit or fee that is part of the taxable price.
County Lodging Taxes and Local Marketing District Taxes
On top of the state 2.9%, most Colorado counties impose a county lodging tax on short term rentals, typically calculated at 0.9% to 2% of the booking. These county taxes are filed with the Colorado Department of Revenue on the same return, not with the county government itself.
The ceiling is rising. House Bill 25-1247, signed into law in May 2025, lets counties raise their lodging tax rate from a maximum of 2% up to 6%, subject to local voter approval. Expect resort counties to put increases on a November ballot in the coming years, which makes it worth rechecking your rates in January and June ahead of the Colorado Department of Revenue's twice-yearly updates to its rate publication page (DR 1002).
Local marketing district taxes add another 1.4% to 4% in tourism-heavy areas, and special district taxes apply inside certain boundaries, like the 0.725% housing authority levy in Summit County. All of these state-administered taxes appear on the same DR 0100, so the number of line items grows, but the number of tax returns does not.
Home Rule Cities: Denver, Breckenridge, Vail, and Aspen
Colorado has dozens of home rule cities that administer their own taxes on lodging, driven by local concerns about housing that residents can afford and by the revenue that short term rentals generate. In these jurisdictions you register with the city government, obtain any required city license, collect at the city rate, and remit directly to the city, separate from your state filings. The following examples show the range:
Denver imposes a 10.75% lodger's tax on stays under 30 days, on top of the state 2.9%. Denver also limits short term rental permits to a host's primary residence, so investor-owned rental property cannot legally operate there. The owner files lodger's tax returns directly with the city.
Breckenridge guests pay a combined 12.275% on lodging: 2.9% state, 2.75% Summit County (including transit), 0.725% Summit County housing authority, 2.5% town sales, and a 3.4% town accommodations tax. Each owner also pays a regulatory fee of $756 per bedroom per year plus a business and occupational license tax, and the town collects its share directly because it is a home rule jurisdiction inside Summit County.
Vail charges a regulatory fee of $1,200 per bedroom per year and requires $1 million in liability insurance before it will issue a short term rental license.
Aspen runs three permit types with zone caps and a limited waitlist for investor permits, plus its own city tax collection. Aspen voters also approved a dedicated STR tax of up to 10% on some permit categories, one of the highest city rates in the state. Availability of new permits is limited in most of these resort towns, with designated zones deciding who can even apply, so factor waitlists into any purchase timeline. Some owners have responded by marketing to traveling nurses and other 30-plus day guests, which sidesteps both lodging taxes and permit caps.
If your rental sits in a home rule city, confirm the city's permits, tax registration, and remittance schedule directly with the city government, and keep copies of every payment. City taxes are the single most common compliance gap we see with short term rentals, and it is where a professional Airbnb management team earns its fee by keeping every registration and license current.
Colorado Income Tax on Rental Earnings
Colorado taxes the net profit from a rental property at a flat 4.4% income tax rate, applied to your federal taxable income. Depreciation, mortgage interest, management fees, and operating costs all reduce the taxable number, and cost segregation can push it negative on paper. Because the state return starts from the federal return, federal STR strategy flows straight through: if you materially participate, paper losses can offset other income under the short term rental tax loophole. See our guide to material participation for short term rentals for the seven IRS tests and the records each one requires.
Property Tax: The Fight Over Lodging Classification
Like other residential properties, short term rentals in Colorado are currently assessed at roughly a 6.7% assessment rate, even when the space is rented exclusively to vacationers. Commercial properties classified as lodging, like hotels and motels, are assessed under state law at 27.9% to 29%, more than four times higher. Reclassification would roughly quadruple the property tax bill on affected homes and condos, which is why this is the most watched tax policy fight for STR owners in the state.
Lawmakers have tried repeatedly to change how these rental properties are taxed. A 2024 proposal from Senator Chris Hansen, a Denver Democrat, and a separate house bill (HB24-1299) would have reclassified any rental property that is not a primary residence as lodging if it was rented for short term stays more than 90 days per calendar year. Both were rejected, and a similar measure drafted by the Legislative Oversight Committee Concerning Tax Policy also stalled. For now, short term rental properties keep residential treatment, but the 90-day threshold proposal keeps returning in recent years, and property owners in the mountain towns are its main target. Owners who rent heavily should follow each session and model the downside before buying. Long term rentals and homes occupied by their owners or other full-time residents are unaffected by these proposals.
Record-Keeping, Audits, and Penalties
Keep booking records, rental receipts, guest folios, and copies of every return and payment for at least three years, organized by jurisdiction. File and pay on time: late filings generate penalties, interest, and late fees at both the state and city level, and home rule cities audit short term rentals aggressively. Note that enforcement goes beyond taxes: Steamboat Springs, for example, has issued fines of up to $2,650 per day for operating short term rentals without required permits under its overlay zones, and repeat violators can lose the right to operate for two years. A timely-filing owner receives a small vendor service fee credit on the DR 0100, so filing on schedule literally pays. If a guest cancels and you issue a refund, you can take a credit for the taxes on a later return rather than losing the money.
Exemptions and Special Cases
A few situations change the tax treatment of short term rentals:
Stays of 30 days or more. Rent from long term rentals is not subject to sales or lodging taxes. If a guest books 45 days, the whole reservation is exempt.
Charitable organizations. Sales to qualifying charitable organizations and government agencies can be exempt when the organization pays directly and provides its exemption certificate. Keep the certificate on file as supporting documentation, because you must provide it if the state questions the deduction.
Owner type does not matter, but registration does. Whether you hold the property as a natural person, an LLC, or a corporation, the same taxes apply. What changes is the business information on the form you submit and who signs the tax returns.
Property managers. If a property manager or co-host operates the rental property and collects the money, the manager can hold the sales tax license and handle the filings for the property, but the owner remains responsible under the law if returns stop being filed. Ask any manager you hire exactly which taxes they remit; use their answer as a screening test.
Filing Deadlines and How to Stay Current
State-administered returns are due the 20th of the month following the reporting period. Miss that deadline and a failure-to-file penalty starts accruing immediately. A practical system for short term rental owners:
1. Use MyBizColorado to obtain your sales tax license before your first booking, and keep the account information current.
2. Mark every filing deadline for every required jurisdiction, including home rule cities, in the same calendar you use for guest turnovers, whichever filing frequency you are assigned. Most owners file in January, April, July, and October if quarterly, or within 20 days of month end if monthly.
3. Reconcile platform-collected taxes monthly. Airbnb and Vrbo publish transaction reports showing what they collected and remitted on each booking; use these reports to fill in the deduction lines on your DR 0100 and to answer questions if you receive an audit notice months later.
4. File the return in slow months too, rather than assuming no rent means no filing.
Colorado Short Term Rental Tax FAQs
Do I need a sales tax license if Airbnb collects my taxes?
Yes. The state still requires every owner to hold a sales tax license and file tax returns, even when a marketplace collects on your behalf. You report marketplace sales as deductions rather than paying twice, and you must still file zero dollar returns for periods with no direct bookings.
What is the total rate my guests pay in Colorado?
It depends on the jurisdiction. The state 2.9% is the floor. With county and city lodging taxes, local marketing district taxes, special district taxes, and city taxes, combined rates on a reservation commonly land between 8% and 15%. Denver guests pay 13.65% and Breckenridge guests pay 12.275%.
Do I collect taxes on a security deposit?
A refundable security deposit is not taxable when collected. If you later keep part of it for damages, that kept amount generally does not count as lodging revenue either, but document it. Nonrefundable fees that are part of the price of the stay, like cleaning fees, belong in the tax base and must be reported with the rest of the reservation.
Are stays of 30 days or more taxable?
No. Colorado lodging taxes apply to short term rentals of fewer than 30 consecutive days. Rent from long term rentals of 30 days or more is exempt from sales and lodging taxes, though the income is still subject to the 4.4% income tax.
Will Colorado reclassify my rental as lodging property?
Not currently. Every proposal to change the property tax treatment of short term rentals to lodging has failed so far. The recurring version uses a 90-day rental threshold for homes that are not a primary residence and are not occupied by long-term tenants, so watch future sessions if that describes your property.
What happens if I sell the property?
Close out your sales tax account with the Colorado Department of Revenue and complete final returns for every jurisdiction. City licenses generally do not transfer to the buyer, and in permit-capped resort towns the buyer may not qualify for a new permit at all, which affects what buyers will pay. Availability is limited, so a transferable license, where one exists, is worth real money.
How does Colorado compare with other states on STR taxes?
State taxes are light (2.9% sales tax plus a 4.4% flat income tax, with no separate tax on services), but local taxes are heavy, and mountain town regulatory fees like Vail's $1,200 per bedroom are among the highest in the country. Factor total carrying costs and local regulations, not just short term rental tax rates, when you compare markets.
Where can I get additional information for specific situations?
Visit Tax.Colorado.gov for guidance from the Colorado Department of Revenue, including the DR 1002 rate listing and business tax classes. For specific questions about home rule city requirements, contact the city's finance office directly. For federal questions like depreciation, deductions, and how your rental income is calculated, work with a CPA who knows short term rental tax rules.
What records should I keep, and for how long?
Keep reservation records, receipts, tax returns, and proof of payment for at least three years for every jurisdiction where you file. If your number of listings grows, keep a per-property file, because audits are conducted location by location.
Get Your Colorado STR Numbers Right Before You Buy
Taxes are only one input in the underwriting. Explore STR market data to compare revenue potential across markets, and check a specific property's Surge Score for a data-driven performance estimate you can model taxes against. If you want the compliance handled for you, from tax registrations and permits to guest messaging, book an intro call with our team or learn how our Airbnb co-host service works. You can also reach us at (888) 616-8149.