Comparison•2025 Tax Year•Last verified: January 2026
California vs Colorado: Side Hustle Tax Comparison 2025
Compare California and Colorado taxes for freelancers and gig workers. Colorado's flat 4.4% rate is much lower than California's up to 13.3%.
California and Colorado both attract outdoor enthusiasts and tech workers, but their tax policies differ significantly. California's progressive rates reach up to 13.3%, while Colorado has a flat 4.4% rate—much lower and simpler.
Colorado (especially Denver and Boulder) has become a popular destination for California tech workers seeking lower taxes, lower cost of living, and mountain lifestyle. For side hustlers, the tax savings can be substantial while maintaining access to a growing tech ecosystem.
**Why This Comparison Matters:**
California to Colorado migration has grown significantly:
- **Flat 4.4% vs up to 13.3%**: Colorado's rate is dramatically lower
- **Tech hub growth**: Denver/Boulder has a thriving tech and startup scene
- **Mountain lifestyle**: Access to world-class skiing, hiking, outdoor activities
- **Lower cost of living**: Denver is cheaper than Bay Area or LA
- **Similar culture**: Both states have progressive, outdoor-oriented cultures
For side hustlers, moving from California to Colorado could mean saving 4-9% on state taxes while enjoying a mountain lifestyle and growing tech opportunities.
Side-by-Side Tax Comparison
| Metric | California | Colorado |
|---|---|---|
| State Income Tax Rate | 1% - 13.3% (progressive) | 4.4% (flat) |
| Common Rate for Side Hustlers | 6% - 9.3% | 4.4% |
| State Tax Filing Required | Yes (Form 540) | Yes (Form 104) |
| Federal SE Tax | 15.3% | 15.3% |
| Est. Tax on $20K Side Hustle* | ~$9,086 | ~$8,106 |
| Annual Savings (CO vs CA)* | — | ~$980 |
| Property Tax (Avg Rate) | 0.71% | 0.51% |
| Sales Tax (State + Avg Local) | 8.82% | 7.77% |
| Tech Hub Ranking | #1 (Bay Area) | #7 (Denver) |
*Assumes single filer with $60,000 W-2 income + $15,000 net side hustle income. Actual taxes vary based on deductions, filing status, and total income.
California Analysis
**California Tax Analysis for Side Hustlers**
California's progressive tax system takes a significant bite, especially for those with W-2 income pushing side hustle earnings into higher brackets.
**Key California Tax Facts (2025):**
- **Tax Type**: Progressive (9 brackets)
- **Rate Range**: 1% to 13.3%
- **Common Side Hustler Rate**: 6% to 9.3%
- **Mental Health Services Tax**: Additional 1% over $1 million
**Example**: If you earn $80,000 from your W-2 job and $20,000 from side hustle income (net of expenses) in California:
- Federal SE Tax: ~$2,826
- Federal Income Tax on side income: ~$4,400
- California State Tax: ~$1,860
- **Total Tax on Side Hustle: ~$9,086** (45.4% effective rate)
California offers unmatched tech ecosystem access and coastal lifestyle, but the tax premium is steep.
Colorado Analysis
**Colorado Tax Analysis for Side Hustlers**
Colorado has a flat 4.4% income tax rate, making it much simpler and cheaper than California's progressive system.
**Key Colorado Tax Facts (2025):**
- **State Income Tax**: 4.4% flat rate
- **Tax Type**: Flat (same rate for all income levels)
- **Filing Requirement**: Yes, but simplified with flat rate
- **No City Income Tax**: Colorado cities don't add income tax
**Example**: Same scenario—$80,000 W-2 job and $20,000 from side hustle income (net of expenses) in Colorado:
- Federal SE Tax: ~$2,826
- Federal Income Tax on side income: ~$4,400
- Colorado State Tax: ~$880
- **Total Tax on Side Hustle: ~$8,106** (40.5% effective rate)
**Savings vs California: ~$980/year** on $20,000 of side hustle income.
Colorado offers growing tech opportunity (Denver, Boulder), world-class outdoor recreation, and a flat tax that treats all income the same.
Calculate Your Side Hustle Taxes
Use our calculator to see exactly what you'd owe in each state. Try entering your numbers, then switch between California and Colorado to compare.
Which State Is Right for Your Side Hustle?
**California May Be Better If You:**
- Work in industries centered in SF or LA (VC, entertainment, certain tech niches)
- Need physical access to Sand Hill Road or major tech campuses
- Value coastal lifestyle over mountain lifestyle
- Have Prop 13 protected property
- Have deep professional networks in California
**Colorado May Be Better If You:**
- Want significant tax savings (4.4% vs 6-9%+)
- Are drawn to mountain lifestyle (skiing, hiking, outdoor recreation)
- Can work remotely or are in a field with Denver/Boulder presence
- Want lower overall cost of living
- Are building new professional networks anyway
**Important Considerations:**
1. **Tech ecosystem**: While Denver/Boulder is growing, the Bay Area's tech ecosystem is still significantly larger and more developed. Factor in career opportunity costs.
2. **California exit**: CA's FTB will audit former residents. Establish genuine Colorado residency—don't maintain a CA apartment.
3. **Cost of living**: Denver has gotten more expensive but is still cheaper than Bay Area or LA. Boulder is pricier.
4. **Altitude adjustment**: Denver is 5,280 feet elevation. Some people need time to adjust. Visitors from sea level may feel effects.
5. **Weather trade-off**: Colorado has four seasons including cold, snowy winters. If you dislike cold weather, this is a significant lifestyle change from coastal California.
6. **Property taxes favor Colorado**: Colorado's average property tax (0.51%) is lower than California's (0.71%), adding to overall savings.
Frequently Asked Questions
How much will I save moving from California to Colorado?
The savings depend on your California bracket. If you're in the 9.3% CA bracket, you'd save 4.9% by moving to Colorado's 4.4% flat rate. On $20,000 of side hustle income, that's about $980/year. On $40,000, it's nearly $2,000/year. Higher earners save even more due to CA's higher brackets.
Is Colorado's tech scene big enough for freelancers?
Denver/Boulder has a thriving tech scene with major companies (Google, Amazon, Apple offices) and active startup community. It's smaller than the Bay Area but sufficient for most freelancers. Remote work also means you can serve any market from Colorado. The tech scene has grown significantly in recent years.
How does Colorado's flat tax work?
Colorado charges a flat 4.4% on all taxable income regardless of how much you earn. This is simpler than California's progressive system with 9 brackets. Whether you earn $20,000 or $200,000 in side hustle income, you pay 4.4% to Colorado. This simplicity also makes tax planning easier.
Related Comparisons
Sources
- • California Franchise Tax Board - 2025 Tax Rates
- • Colorado Department of Revenue - 2025 Tax Rates
- • IRS Publication 334 - Tax Guide for Small Business
- • Tax Foundation - State Tax Data 2025