Active-duty and reserve pay
Residents stationed outside the 50 states for at least 305 days of the year can file as nonresidents, so their military pay is not taxed. Combat zone pay excluded federally is also excluded.
An E-5 with over 6 years of service earns $49,320 a year in basic pay. In Colorado, that pay is normally excluded from state income tax. Housing and food allowances are never taxed by any state.
Military retired pay
Up to $15,000 of military retired pay is excluded below age 55, with the general pension subtraction available at older ages.
Your state of legal residence decides
Military pay is taxed by your state of legal residence, usually the state you lived in when you joined or one you later adopted by changing your records, not by the state where you are stationed. This comes from the Servicemembers Civil Relief Act. Spouses can choose to use the member's state of legal residence for their own income too.
See your total pay with state tax
Questions
Does Colorado tax military pay?
Colorado does not tax active-duty military pay in the cases described here. Residents stationed outside the 50 states for at least 305 days of the year can file as nonresidents, so their military pay is not taxed. Combat zone pay excluded federally is also excluded.
Does Colorado tax military retirement pay?
Up to $15,000 of military retired pay is excluded below age 55, with the general pension subtraction available at older ages.
Is BAH taxed in Colorado?
No. BAH and BAS are not taxable income for federal or state tax in any state.
Which state taxes me if I am stationed in Colorado?
Under the Servicemembers Civil Relief Act, your military pay is taxed only by your state of legal residence, not the state where you are stationed. If Colorado is not your legal residence, Colorado does not tax your military pay.