Most sellers know about the commission. That's usually where their list of selling costs ends.
The real list is longer. There are closing costs that come out of the seller's proceeds at the table, and there can be taxes that show up later, after the money has already been spent on the next house. In Colorado, there's also a withholding rule that catches out-of-state sellers off guard every year.
Here's the full picture: what comes out at closing, what might come due at tax time, and how to tell which sellers need to call their CPA before they list.
The short answer
On a typical Front Range sale, a seller's costs fall into three buckets:
- Closing costs — commission, the owner's title policy, the seller's half of the closing fee, HOA fees, a property tax proration, and a handful of small fees. These come out of the proceeds at closing.
- Withholding — if the seller isn't a Colorado resident, the title company may be required to hold back 2% of the sale price for the state. Foreign sellers can also face federal FIRPTA withholding.
- Income tax on the gain — federal capital gains tax and Colorado income tax, if the profit isn't covered by the home sale exclusion. This doesn't come out at closing. It's due when the seller files their return.
Most owner-occupants who've lived in the home a couple of years only deal with the first bucket. Investors, landlords, out-of-state owners, and people who bought a long time ago are the ones who need to look at all three.
Bucket 1: Closing costs paid out of the seller's proceeds
Almost all of these are negotiable in the Colorado contract. What follows is what's common in El Paso County and the Denver metro, not what's required.
| Cost | Who usually pays | What drives the amount |
|---|---|---|
| Real estate commission | Seller (per listing agreement and contract) | Negotiated percentage or flat fee |
| Owner's title insurance policy | Seller, on most Front Range deals | Sale price |
| Closing / settlement fee | Commonly split buyer and seller | Title company's rate |
| Property tax proration | Seller credits buyer | Prior year's tax bill and closing date |
| HOA status letter, transfer, and related fees | Set by contract | The association and management company |
| Seller concessions and repair credits | Seller | Whatever was negotiated |
| Mortgage payoff (including accrued interest) | Seller | Loan balance plus interest through payoff |
| Tax certificate, release recording, misc. | Usually seller | Small, fixed fees |
A few of these deserve a closer look.
Property taxes are paid in arrears
This is the Colorado one. Property taxes are paid a year behind, so a seller who closes in July hasn't paid any of this year's taxes yet. They credit the buyer for January 1 through the day before closing, and the buyer pays the full bill next year. It shows up as a charge to the seller, and sellers who moved here from another state often assume it's a mistake. It isn't.
If the seller closes early in the year and hasn't paid last year's bill yet, they can end up paying last year's taxes and this year's proration on the same settlement statement.
The owner's title policy
On most Front Range sales, the seller pays for the buyer's owner's policy. The premium is based on the sale price, so it moves when the price moves. If the seller bought or refinanced recently, they may qualify for a reduced rate. The title insurance savings post has the actual numbers.
The documentary fee
Colorado doesn't have a state real estate transfer tax. What it does have is a documentary fee of one cent per $100 of the sale price, collected by the county clerk when the deed is recorded. On a $500,000 sale, that's $50. The contract says who pays it.
A handful of Colorado mountain towns do have their own local transfer taxes. If your seller owns property in a resort community, check. In Colorado Springs and the Denver metro, it isn't a factor.
The costs that never hit the settlement statement
Pre-listing repairs, paint, cleaning, staging, storage, moving, and the mortgage payments made while the house is on the market. None of these show up at closing, but they're real money. Sellers should budget for them separately.
For a line-by-line example of what a seller actually walks away with, see the seller net sheet post.
Bucket 2: Colorado's 2% nonresident withholding
This is the one people sometimes call the "Colorado holding tax." It isn't a separate tax. It's a prepayment of Colorado income tax that the title company is required to collect at closing.
When it applies: the seller is a nonresident individual, estate, or trust (or a corporation without a permanent place of business in Colorado), and the sale price is more than $100,000.
How much: the lesser of 2% of the sale price or the seller's net proceeds.
Example: an out-of-state owner sells a Colorado Springs rental for $450,000. Unless an exception applies, the title company withholds $9,000 and sends it to the Colorado Department of Revenue, where it's credited to the seller's account like an estimated tax payment. The seller then files a Colorado nonresident return. If they owe less than $9,000, they get the difference back. If they owe more, they pay the rest.
How sellers avoid it: at closing, the seller completes form DR 1083. A seller who is actually a Colorado resident can affirm that. A nonresident can sign an affirmation that no Colorado income tax will be due on the sale, if that's true — for example, because the gain is covered by the home sale exclusion or there's no gain at all. If they sign it, there's no withholding. Signing it when it isn't true is the seller's problem, not the title company's, so this is a CPA question, not a guess.
Foreign sellers are different. If the seller isn't a U.S. person, federal FIRPTA withholding can apply on top of Colorado's, and it's a much bigger number — generally 15% of the sale price, with some exceptions. If you have a foreign seller, tell your title company the day the contract is signed. These files need lead time.
Bucket 3: Capital gains and Colorado income tax
This is the bucket nobody sees at closing, because nothing comes out of the proceeds for it. It shows up in April.
How the gain is calculated
The gain isn't sale price minus purchase price. It's:
Sale price − selling costs − (purchase price + purchase closing costs + capital improvements − any depreciation taken) = gain
That means the commission and most closing costs reduce the gain, and so does a new roof, a finished basement, or a kitchen remodel. Routine repairs and maintenance don't count. Sellers who kept their receipts are in better shape than sellers who didn't.
The home sale exclusion
Under Section 121 of the tax code, a seller can exclude up to $250,000 of gain ($500,000 for married couples filing jointly) on the sale of their primary residence if:
- They owned the home for at least 2 of the last 5 years, and
- They lived in it as their main home for at least 2 of the last 5 years, and
- They haven't used the exclusion on another home in the last 2 years.
The two years don't have to be in a row. There's also a partial exclusion for people who have to sell early because of a job change, health, or certain other unforeseen events.
Those $250,000 and $500,000 limits were set in 1997 and have never been adjusted for inflation. A Colorado Springs couple who bought in the early 2000s and has done a lot of work on the house can get closer to that line than they'd expect. That's the group that should run the numbers before listing.
Federal capital gains rates
Any gain that isn't excluded is taxed federally.
- Owned more than one year: long-term rates of 0%, 15%, or 20%, depending on taxable income. Most sellers land in the 15% bracket.
- Owned one year or less: taxed as ordinary income at regular rates. This is the flipper's problem — a quick flip is usually taxed like wages.
- Higher earners: the 3.8% net investment income tax can apply on top.
Colorado income tax
Colorado doesn't have a separate capital gains tax. Gains are taxed as regular income at the state's flat rate, which is 4.4% for 2026. Colorado starts with federal taxable income, so if the federal exclusion covers the gain, Colorado generally doesn't tax it either.
The rate has moved before when the state had a TABOR surplus, so confirm the current rate for the year of the sale.
Depreciation recapture: the landlord surprise
If the property was ever a rental — or part of it was, like a basement apartment or a home office that was depreciated — the depreciation that was taken (or could have been taken) gets taxed when it sells, at a federal rate of up to 25%. The home sale exclusion does not cover it.
Two examples
These are simplified and illustrative only. They assume the 15% federal bracket, ignore the 3.8% net investment income tax, and aren't tax advice. The point is to show which sellers need to call a CPA, not to calculate anyone's actual bill.
Example 1: Owner-occupant
Bought in 2016 for $300,000. Put $40,000 into a remodel and a new roof. Lived there the whole time. Sells in 2026 for $500,000 with $32,000 in selling costs.
| Line | Amount |
|---|---|
| Sale price | $500,000 |
| Selling costs | –$32,000 |
| Purchase price + improvements | –$340,000 |
| Gain | $128,000 |
| Home sale exclusion (single) | –$128,000 |
| Taxable gain | $0 |
No federal capital gains tax, no Colorado income tax. This is most sellers.
Example 2: Same house, but it's been a rental for the last four years
Same purchase, same improvements, same sale. But the owner moved out in 2022 and rented it, so they no longer meet the 2-of-5-year use test. Say $30,000 of depreciation was taken during the rental years.
| Line | Amount |
|---|---|
| Sale price | $500,000 |
| Selling costs | –$32,000 |
| Adjusted basis ($340,000 − $30,000 depreciation) | –$310,000 |
| Total gain | $158,000 |
| Depreciation recapture: $30,000 at up to 25% | up to $7,500 |
| Remaining $128,000 at 15% | $19,200 |
| Colorado: $158,000 at 4.4% | $6,952 |
| Estimated tax | about $33,650 |
Same house, same price, and roughly a $33,000 difference — all because of how it was used in the last five years. If this owner had sold a year earlier, while they still met the use test, the picture could have looked very different. A 1031 exchange into another investment property is another option for this seller, and it has to be set up before closing. (More on that in the 1031 exchange post.)
Which sellers should talk to a CPA before they list
- The home was ever a rental, or part of it was rented or depreciated
- They've lived there less than two of the last five years
- They bought a long time ago and the gain could be near or over $250,000 / $500,000
- It's a flip or any property owned a year or less
- They don't live in Colorado anymore
- They aren't a U.S. citizen or resident
- The property was inherited, is in a trust or LLC, or is being sold in a divorce
- They used the home sale exclusion on another property in the last two years
A seller who checks none of those boxes usually only needs to worry about closing costs. A seller who checks any of them should have the tax conversation before the price is set, not after the money is gone.
The short version
Commission is the cost everyone knows about. Title, the tax proration, HOA fees, and the payoff are the ones a net sheet catches. Colorado's 2% withholding is the one that surprises out-of-state sellers. And capital gains and depreciation recapture are the ones that show up in April for landlords, flippers, and long-time owners.
Agents don't need to give tax advice. They do need to know which sellers to send to a CPA early.
What fees does a seller pay when selling a house in Colorado?
Commonly the real estate commission, the buyer's owner's title insurance policy, half of the closing fee, a property tax proration, HOA transfer and status letter fees, any agreed concessions or repair credits, and small fees like the tax certificate and lien release recording. Most of these are negotiable and set by the contract.
Does Colorado have a real estate transfer tax?
Not at the state level. Colorado charges a small documentary fee of one cent per $100 of the sale price when the deed is recorded. A few mountain towns have their own local transfer taxes, but Colorado Springs and the Denver metro don't.
What is the Colorado 2% withholding on home sales?
When a nonresident sells Colorado real estate for more than $100,000, the title company generally has to withhold the lesser of 2% of the sale price or the net proceeds and send it to the Colorado Department of Revenue. It's a prepayment of Colorado income tax, not an extra tax. The seller can get some or all of it back by filing a Colorado return, and it may not apply if the seller signs an affirmation on form DR 1083 that no Colorado tax is due.
Do I pay capital gains tax when I sell my house in Colorado?
Usually not on a primary residence. If you owned and lived in the home for at least two of the last five years, you can generally exclude up to $250,000 of gain, or $500,000 if married filing jointly. Gain above that, or gain on a rental or second home, can be taxed federally and by Colorado.
Does Colorado tax capital gains?
Yes, as regular income at the state's flat income tax rate, which is 4.4% for 2026. There's no separate state capital gains rate. If a gain is excluded federally under the home sale exclusion, it's generally not taxed by Colorado either.
Does the title company withhold capital gains tax at closing?
No, except for required withholding like Colorado's nonresident withholding or federal FIRPTA for foreign sellers. For everyone else, capital gains tax is paid when the seller files their tax return. The title company does report the sale to the IRS on Form 1099-S when required.
What is depreciation recapture?
If you took depreciation on a property while it was a rental, that amount is taxed when you sell, at a federal rate of up to 25%. The home sale exclusion doesn't cover it, even if you later moved back into the home.
Want the seller's real numbers?
Send me the address, the price, and what you know about the payoff and HOA. I'll get you a net sheet, and I can flag early if the file looks like it needs nonresident withholding.
This article is general educational information about selling costs and taxes on Colorado real estate sales. It isn't legal or tax advice. Tax rates, thresholds, and withholding rules change and depend on each seller's situation, so sellers should confirm the details with their CPA or tax advisor before they list.