Filing Taxes for a Deceased Person in Colorado: What Executors Must Know

Tax obligations do not disappear when someone dies — they shift to the executor. Most Colorado executors have three distinct tax filings to manage: the decedent's final federal and state income tax returns, potentially a fiduciary income tax return for the estate entity, and (rarely) a federal estate tax return. Understanding which of these apply to your situation and when they are due is one of the more consequential administrative tasks of the entire probate process.

The good news: Colorado has no state-level estate tax or inheritance tax, which eliminates an entire category of state filings that executors in many other states must navigate.

The Decedent's Final Income Tax Returns

The executor is responsible for filing the decedent's final federal and Colorado income tax returns, covering the period from January 1 of the year of death through the date of death.

Federal return (IRS Form 1040): File as you would a normal individual return, but mark it as "Deceased" with the date of death. If the decedent was married, the surviving spouse may file a joint return for the year of death. The standard tax deadline applies: April 15 of the following year (or October 15 with an extension). If the decedent had income but no return was filed for prior years, those returns must also be filed.

Colorado return (Form DR 0104): File the state income tax return for the portion of the year the decedent was alive. Colorado taxes income earned in the state regardless of residency status. The same deadlines apply as the federal return.

If a refund is due on either return, the executor must file IRS Form 1310 (Statement of Person Claiming Refund Due a Deceased Taxpayer) to have the refund directed to the estate — unless the executor is the surviving spouse filing a joint return, in which case Form 1310 is not required.

Estate Fiduciary Income Tax Return (IRS Form 1041 and Colorado DR 0105)

If the estate generates income during the administration period — from investments left in estate accounts, rental income from estate real estate, business income, or asset sales — the estate is treated as a separate taxable entity and must file its own income tax returns.

This is separate from the decedent's final return. The estate becomes a taxable entity the moment it receives income, starting from the day after the date of death.

IRS Form 1041 — Fiduciary Income Tax Return — is filed for the estate if it has gross income of $600 or more in any tax year. The estate's fiscal year can begin on the date of death and end on any month-end the executor selects within 12 months of death (not necessarily December 31). Choosing a fiscal year that aligns with when major distributions will occur can optimize the estate's tax position.

Colorado Form DR 0105 — Colorado Fiduciary Income Tax Return — is the state equivalent. Colorado taxes the fiduciary income generated by estates with Colorado-source income.

To file either return, the estate must have its own Employer Identification Number (EIN), obtained from the IRS at no cost at IRS.gov. Do not use the decedent's Social Security number for the estate's tax filings after the date of death.

Colorado Has No State Estate Tax

Colorado is one of 38 states with no state-level estate tax or inheritance tax. This means:

• No Colorado estate tax return is required regardless of the estate's size
• No inheritance tax is owed by beneficiaries receiving distributions from a Colorado estate
• There are no state-level transfer tax filings associated with probate

This is a significant advantage for Colorado estates compared to states like Oregon, Massachusetts, or Washington, which impose state estate taxes on estates above much lower thresholds.

Federal Estate Tax: IRS Form 706

The federal estate tax return (IRS Form 706) is required only if the decedent's gross estate plus lifetime taxable gifts exceeds the federal basic exclusion amount. For 2026, that threshold is $15,000,000 per individual.

For the vast majority of Colorado families, this threshold means IRS Form 706 is not required. A $500,000 estate, a $1,000,000 estate, even a $5,000,000 estate — none of these require a federal estate tax return.

The portability exception: Even when the estate is below the $15,000,000 threshold, married couples should consider whether to file IRS Form 706 to elect portability. Portability allows a surviving spouse to capture the deceased spouse's unused portion of the federal basic exclusion, potentially sheltering up to $30,000,000 from future federal estate tax as a combined couple.

Form 706 for portability must be filed by the due date of the estate tax return, which is 9 months after the date of death (extendable by 6 months). IRS Revenue Procedure 2022-32 provides a simplified method to make a late portability election up to 5 years after death for certain qualifying estates.

Filing Form 706 for portability is a CPA-level task. The calculation of the augmented estate, the applicable exclusion amount, and the deceased spousal unused exclusion (DSUE) requires professional preparation.

Tax Basis for Inherited Assets

A less obvious but financially important tax issue for beneficiaries: inherited assets generally receive a "stepped-up basis" to their fair market value at the date of death. This means if a beneficiary inherits stock that the decedent bought for $10,000 but was worth $80,000 at death, the beneficiary's tax basis is $80,000 — not $10,000. When the beneficiary sells the stock, capital gains tax is calculated from the $80,000 stepped-up basis.

Accurate date-of-death valuations on the estate inventory (JDF 941) are essential for establishing the correct stepped-up basis. Appraisals that understate asset values might reduce the apparent size of the estate but create larger capital gains tax obligations for heirs when they sell assets.

When to Bring in a CPA

The executor's tax obligations are manageable for simple estates with straightforward income. But professional help is appropriate — and often necessary — in these situations:

• The estate has significant investment income during the administration period
• The decedent had complex tax situations in their final years (self-employment, business interests, international income)
• The estate is approaching or exceeds the federal exemption amount
• The surviving spouse wants to capture portability via Form 706
• The estate has real estate sales that require capital gains analysis
• The decedent had outstanding IRS audit issues or unfiled returns

CPA fees for estate tax work vary widely but typically range from $500 to $2,500 for straightforward fiduciary returns, and higher for complex estates requiring Form 706. These fees are paid from the estate and are deductible as administration expenses.

Summary of Tax Obligations for Colorado Executors

The Colorado Probate Process Guide addresses the tax coordination phase of estate administration, including when to hire a CPA, how to coordinate the estate's fiscal year with the administration timeline, and how the inventory's date-of-death valuations affect both the estate's tax filings and the beneficiaries' future capital gains obligations.

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