Comparison•2025 Tax Year•Last verified: January 2026
Colorado vs Texas: Side Hustle Tax Comparison 2025
Compare Colorado and Texas taxes for freelancers and gig workers. Texas has no income tax while Colorado has a flat 4.4% - see how they compare for your side hustle.
Colorado and Texas both attract migrants seeking opportunity and lower costs than the coasts. Texas offers zero state income tax, while Colorado has a flat 4.4% rate—but Colorado offers mountain lifestyle, outdoor recreation, and a different cultural vibe that many find worth the premium.
For side hustlers choosing between Denver/Boulder and Austin/Dallas, the tax difference is clear but not always decisive. This guide helps you weigh the financial trade-offs against lifestyle factors.
**Why This Comparison Matters:**
Both states are growing rapidly with different appeals:
- **Texas**: Zero income tax, largest economy in the Sun Belt
- **Colorado**: 4.4% flat tax, mountain lifestyle, outdoor recreation
- **Tech competition**: Austin and Denver both have thriving tech scenes
- **Cost of living**: Texas is generally cheaper; Denver has gotten expensive
- **Climate**: Colorado has four seasons; Texas is mostly hot
For side hustlers, Texas saves 4.4% on income—a meaningful amount. But Colorado's lifestyle and growing economy keep it competitive for many.
Side-by-Side Tax Comparison
| Metric | Colorado | Texas |
|---|---|---|
| State Income Tax Rate | 4.4% (flat) | 0% (no income tax) |
| State Tax Filing Required | Yes | No |
| Federal SE Tax | 15.3% | 15.3% |
| Est. Tax on $20K Side Hustle* | ~$8,106 | ~$7,226 |
| Annual Savings (TX vs CO)* | ~$880 | — |
| Property Tax (Avg Rate) | 0.51% | 1.63% |
| Sales Tax (State + Avg Local) | 7.77% | 8.20% |
| Property Tax on $400K Home | ~$2,040/year | ~$6,520/year |
| Tech Hub | Denver/Boulder | Austin |
*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.
Colorado Analysis
**Colorado Tax Analysis for Side Hustlers**
Colorado has a flat 4.4% income tax rate—higher than Texas's zero, but still relatively low nationally.
**Key Colorado Tax Facts (2025):**
- **State Income Tax**: 4.4% flat rate
- **Tax Type**: Flat (same rate for all income)
- **Filing Requirement**: Yes, but simple
- **No Local Income Tax**: CO cities don't add income tax
- **Property Tax**: Very low (0.51% avg)
**Example**: If you earn $70,000 from your 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)
Colorado offers access to world-class skiing, hiking, and outdoor recreation, plus a growing tech scene in Denver/Boulder. The 4.4% rate funds state services while remaining competitive.
Texas Analysis
**Texas Tax Analysis for Side Hustlers**
Texas has no state income tax, making it the clear tax winner in this comparison.
**Key Texas Tax Facts (2025):**
- **State Income Tax**: 0%
- **Tax Type**: None
- **Filing Requirement**: No state return required
- **Franchise Tax**: Only for businesses over $2.47 million
- **Property Tax**: Higher than Colorado (1.63% avg)
**Example**: Same scenario—$70,000 W-2 job and $20,000 from side hustle income (net of expenses) in Texas:
- Federal SE Tax: ~$2,826
- Federal Income Tax on side income: ~$4,400
- Texas State Tax: $0
- **Total Tax on Side Hustle: ~$7,226** (36.1% effective rate)
**Texas saves you: ~$880/year** on $20,000 of side hustle income.
Texas offers multiple major metros (Austin, Dallas, Houston), diverse industries, and zero state income tax.
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 Colorado and Texas to compare.
Which State Is Right for Your Side Hustle?
**Colorado May Be Better If You:**
- Value mountain lifestyle (skiing, hiking, climbing)
- Want four distinct seasons including real winter
- Are drawn to Denver/Boulder's culture and vibe
- Plan to buy a home (CO property taxes are much lower)
- Prefer a smaller metro over Texas's sprawling cities
**Texas May Be Better If You:**
- Want to maximize income by paying zero state tax
- Work in industries strong in Texas (energy, healthcare)
- Prefer warmer weather year-round
- Want lower overall cost of living
- Plan to rent (property tax less relevant)
**Important Considerations:**
1. **Property taxes favor Colorado**: On a $400,000 home, Colorado saves ~$4,480/year in property taxes vs Texas. For homebuyers, this offsets much of the income tax difference.
2. **Renting favors Texas**: Without property tax considerations, Texas's zero income tax wins clearly.
3. **Denver has gotten expensive**: While cheaper than SF/LA, Denver's cost of living has risen significantly. Some Texas cities remain more affordable.
4. **Altitude matters**: Denver is at 5,280 feet elevation. Some people struggle with the altitude, especially initially.
5. **Tech ecosystems**: Austin is generally considered a larger/hotter tech market, but Denver/Boulder is substantial and growing. Both are viable for tech freelancers.
Frequently Asked Questions
How much will I save living in Texas vs Colorado?
On income tax alone, Texas saves you 4.4% of your taxable income. On $20,000 of side hustle income, that's about $880/year. However, if you're buying a home, Colorado's lower property taxes (~$4,480/year difference on a $400K home) more than offset the income tax. Renters save more in Texas; homebuyers may save more in Colorado overall.
Which state is better for tech freelancers?
Both have strong tech ecosystems. Austin is generally considered hotter right now with major HQ relocations (Tesla, Oracle) and a larger startup scene. Denver/Boulder has a solid tech presence with companies like Google, Amazon, and many startups, plus quality of life that attracts talent. Both are viable choices.
Is Colorado's cost of living much higher than Texas?
Denver has become expensive—housing costs have risen significantly. It's still cheaper than coastal cities but no longer a bargain. Austin has also gotten pricier, though Houston and San Antonio remain more affordable. Compare specific cities rather than states overall.
Related Comparisons
Sources
- • Colorado Department of Revenue - 2025 Tax Rates
- • Texas Comptroller of Public Accounts
- • IRS Publication 334 - Tax Guide for Small Business
- • Tax Foundation - State Tax Data 2025