WeVote
Log In

Bill

Bill

SB 56

State Overtime Compensation Income Tax

2026 Regular Session

Colorado SB 56 would impose state income tax on overtime compensation earnings, creating new tax revenue while potentially reducing take-home pay for workers earning overtime.

Senate Committee on Appropriations Lay Over Unamended - Amendment(s) Failed
#fiscalpolicy&taxes
0
WeVote Research Nonpartisan
Bill Summary · SB 56

Legislative bill overview

SB 56 proposes to tax overtime compensation income in Colorado at a state level. The bill was introduced in January 2026 and has advanced through the State, Veterans, & Military Affairs committee to the Appropriations committee as of February 2026. This represents a new income tax category targeting specifically earnings above regular work hours.

Why is this important

Colorado currently has no state-level overtime compensation tax, making this a potential revenue generator for state coffers during a period when many states face budget pressures. For workers, this could reduce take-home pay on hours worked beyond standard schedules, affecting hourly employees, contractors, and service industry workers who rely on overtime earnings. The tax structure and rate could significantly impact working families and labor-intensive industries.

Potential points of contention

  • Tax burden on working-class employees: Overtime pay often represents critical supplemental income for lower-wage workers; taxing it separately may disproportionately affect those least able to absorb reduced earnings
  • Business competitiveness: Employers may face pressure to reduce overtime opportunities or relocate operations to states without overtime income taxation, potentially affecting workforce stability
  • Definition and scope ambiguity: Unclear whether "overtime compensation" applies only to federally-defined overtime (time-and-a-half) or broader premium pay, and whether it affects salaried employees, independent contractors, or gig workers differently

Compiled from official sources — confirm details with the bill’s official record.

Sign in to ask a question.