Colorado Denver Occupational Privilege Tax Guide 2026: The $5.75/Month Tax Most Workers Don't Know About

Colorado has no broad local income tax system like Ohio or Michigan — but several Colorado cities levy a flat-amount Occupational Privilege Tax (OPT), sometimes called a head tax or business privilege tax. The OPT is not based on income — it is a fixed monthly amount owed by virtually every employee working in the city, plus a separate employer-side charge.

Denver's OPT is the largest and most commonly encountered: $5.75/month withheld from employees and $4.00/month paid by the employer for each employee who earns $500 or more in a calendar month. This applies equally to a minimum-wage part-time worker and a $500,000-per-year executive — the same flat amount either way.

The OPT is modest in absolute terms ($69/year for the employee in Denver) but creates compliance obligations for employers who must register, withhold, and remit monthly or quarterly. Remote workers and multi-city workers create allocation questions that employers frequently handle incorrectly.

Denver OPT Rates and Rules 2026

Denver's OPT is levied under Denver Revised Municipal Code Article III. Both the employee and the employer pay separate OPT obligations:

The $500 earnings threshold: If an employee earns less than $500 in a calendar month (e.g., a part-time worker), neither the employee nor the employer OPT is triggered for that month. For most full-time workers, this threshold is met every month.

Denver OPT Filing and Remittance

Employers must:

1. Register with Denver Treasury for OPT withholding
2. Withhold $5.75 from each qualifying employee's pay each month
3. Remit both the employee OPT withheld ($5.75 × employees) and the employer OPT ($4.00 × employees) to Denver
4. File monthly if annual liability exceeds $100 per month; quarterly otherwise

Filing is done online via Denver's eBiz Tax Services portal. Forms: DR 0100 (combined occupational privilege tax return).

Annual calendar year cap: The Denver OPT applies for each calendar month worked in Denver, up to 12 months per year. Maximum annual employee cost: $69 ($5.75 × 12). Maximum annual employer cost per employee: $48 ($4.00 × 12).

Other Colorado Cities With OPT

Denver is the largest but not the only Colorado city with an Occupational Privilege Tax. Several municipalities in the Denver metro area have their own OPT ordinances:

Important: OPTs can stack if you work in multiple cities. An employee who works some days in Denver and some in Aurora owes Denver OPT on Denver days and Aurora OPT on Aurora days (if over each city's threshold). Employers with multiple locations must track which city each employee works in each month.

Colorado Springs, Fort Collins, Boulder: These cities do NOT levy an OPT. Workers in those cities pay only Colorado state income tax (4.4% flat rate).

Remote Workers and the Denver OPT

The Denver OPT is based on physical work location, not employer headquarters. This creates specific rules for remote workers:

Fully Remote Workers for Denver Employers

An employee who works 100% from home outside Denver for a Denver-based employer does NOT owe Denver OPT. The tax applies to work performed within Denver city limits. Remote workers are exempt from OPT for their remote days.

Hybrid Workers

An employee who works 2 days/week in a Denver office and 3 days from home: they are physically in Denver on those 2 office days. If their Denver-attributable earnings exceed $500 in a month (which is almost always true for full-time employees), the Denver OPT applies for that month — the full $5.75 monthly amount, regardless of how many days in Denver.

The OPT is a monthly flat amount — it is not prorated by the number of days worked in Denver. If you work even 1 day in Denver in a month and earn $500+, you owe the full month's OPT.

Employer Compliance Risk

Denver employers who switched to hybrid/remote work during or after the COVID pandemic may have employees who no longer work in Denver but are still having Denver OPT withheld incorrectly. Conversely, employers may have remote workers who occasionally come to the Denver office but are not being assessed OPT. This is a common audit issue.

Colorado State Income Tax and Combined Burden

The Denver OPT sits on top of Colorado's state income tax. Colorado has a flat state income tax rate of 4.40% for 2026 (reduced from 4.55% under Proposition 121). There is no local income tax in Colorado beyond the flat-amount OPT — no percentage-based municipal income tax anywhere in the state.

Combined burden for a Denver employee earning $80,000:

• Colorado state income tax: approximately $3,520 (4.40% flat)
• Denver employee OPT: $69/year ($5.75 × 12)
• Total state + local: $3,589
• Effective rate: 4.49%

This makes Denver's combined burden quite low compared to similarly-sized cities in other states — Columbus (Ohio) at the same income would pay 4.797% Ohio + 2.5% Columbus city = 7.297%. The Denver OPT's flat-amount structure means it has a regressive character — it takes a higher percentage of a $25,000 worker's income ($69/$25,000 = 0.28%) than a $250,000 worker's income ($69/$250,000 = 0.028%). This is the defining characteristic of occupational privilege taxes vs. percentage-based income taxes.