Colorado · Clergy Housing Allowance Exclusion
Clergy Housing Allowance Exclusion in Colorado (2026)
Ministers can exclude from income the portion of compensation designated as a housing allowance, up to the lesser of actual housing expenses, fair market value, or the designated amount. Colorado has a flat 4.4% income tax, so a Colorado filer's combined marginal rate on the next dollar at $82,254 of income is about 26.4% (22% federal + 4.4% CO).
2026 savings example for Colorado
Planning estimate for a single filer earning $82,254 (Colorado median household income in LevyIO's state dataset) who removes $5,000 from taxable income. Federal tax uses the 2026 IRS brackets after the $16,100 standard deduction; CO tax uses the state brackets in LevyIO's dataset and assumes the state follows the federal treatment.
Estimated total savings
$1,320
Federal savings
$1,100
$9,266 → $8,166 · 22% bracket
CO state savings
$220
$2,959 → $2,739 · 4.4% marginal
Combined marginal rate
26.4%
≈ $264 saved per $1,000 deducted
Federal × Colorado marginal rates (2026, single)
Gross-income ranges include the federal standard deduction. The CO column is the state marginal rate at the midpoint of each range. The last column is the tax saved per $1,000 deducted at that combined rate.
| Federal bracket | Gross income (single) | CO marginal | Combined | Per $1,000 |
|---|---|---|---|---|
| 10% | $16,100 - $28,500 | 4.4% | 14.4% | $144 |
| 12% | $28,500 - $66,500 | 4.4% | 16.4% | $164 |
| 22% | $66,500 - $121,800 | 4.4% | 26.4% | $264 |
| 24% | $121,800 - $217,875 | 4.4% | 28.4% | $284 |
| 32% | $217,875 - $272,325 | 4.4% | 36.4% | $364 |
| 35% | $272,325 - $656,700 | 4.4% | 39.4% | $394 |
| 37% | Over $656,700 | 4.4% | 41.4% | $414 |
Eligibility & forms
Ministers and clergy who receive a housing allowance as part of compensation
- Must be ordained, licensed, or commissioned minister
- Allowance must be designated by employer in advance
- Limited to lesser of: actual expenses, FMV of home, or designated amount
Federal forms: Form 1040, Schedule SE
Colorado filing notes
Federal deductions automatically apply. Watch for TABOR refund checks (taxable federally). Colorado offers retirement income subtractions for 55+ and generous renewable energy credits.
Common mistakes: Not having allowance designated before payment; Exceeding the fair market value limitation; Forgetting to include for self-employment tax purposes.
Frequently asked questions
How much can the Clergy Housing Allowance Exclusion save a Colorado taxpayer in 2026?
In LevyIO's example, a single filer with $82,254 of income (the Colorado median household income in our state dataset) who removes $5,000 from taxable income saves about $1,100 in 2026 federal tax (22% marginal bracket) plus about $220 in Colorado tax (4.4% state marginal rate), roughly $1,320 combined. It is a planning estimate computed from the 2026 IRS brackets and LevyIO's CO bracket data, not a survey figure.
What is the Colorado income tax rate for 2026?
Colorado has a flat 4.4% income tax. The CO standard deduction in LevyIO's dataset is $15,000 single / $30,000 married. Flat 4.4%. Uses federal taxable income. TABOR mandates refunds when revenue exceeds limits.
Who qualifies for the Clergy Housing Allowance Exclusion in Colorado?
Ministers and clergy who receive a housing allowance as part of compensation. The federal rules are the same in every state; the requirements are: Must be ordained, licensed, or commissioned minister; Allowance must be designated by employer in advance; Limited to lesser of: actual expenses, FMV of home, or designated amount. Colorado filers should confirm on the CO return whether the state follows the federal treatment.
Which forms do I file to claim the Clergy Housing Allowance Exclusion?
Federal: Form 1040, Schedule SE. Colorado: check the Colorado Department of Revenue instructions for the matching state schedule. Common mistakes: Not having allowance designated before payment; Exceeding the fair market value limitation; Forgetting to include for self-employment tax purposes.
Clergy Housing Allowance Exclusion in other states
Sources
Reviewed 2026-09-17. Estimates are educational planning figures computed from the IRS 2026 inflation adjustments and LevyIO's state bracket dataset; they are not tax advice.