Summary: Colorado’s unemployment insurance taxable wage base has now reached $30,600 for 2026, completing a multi-year climb from $13,100 in 2019. Going forward, the wage base will be indexed to the state’s average weekly wage rather than set by a fixed schedule.
The taxable wage base is an important component in unemployment insurance calculations. It refers to the maximum annual amount of wages from each employee on which an employer must pay unemployment taxes. Different states set different taxable wage base amounts based on their economic needs, labor market conditions, and unemployment insurance fund balances.
In 2019, the taxable wage base in Colorado stood at $13,100. This means that employers were required to pay state unemployment insurance taxes only on the first $13,100 earned by each employee during that year. Since then, the wage base has climbed steadily under a schedule set by state legislation.
Colorado’s SB 20-207 set out a multi-year plan to raise the taxable wage base incrementally through 2026. This systematic approach allowed employers to anticipate and plan for the yearly increase in their unemployment insurance tax liabilities. The schedule played out as follows:
$13,600 for 2021, an increase of $500 from 2019. $17,000 for 2022, a $3,400 increase. $20,400 for 2023, a $3,400 increase. $23,800 for 2024, a $3,400 increase. $27,200 for 2025, a $3,400 increase. $30,600 for 2026, a $3,400 increase, now the current wage base.
With 2026 in effect, the wage base schedule set by SB 20-207 has run its course. Beginning with future years, the wage base will be adjusted annually based on changes in the state’s average weekly wage, rather than following a fixed legislative schedule. This keeps the wage base aligned with ongoing wage growth across the state.
Solvency surcharge remains in effect for 2026
Colorado’s UI Trust Fund is no longer in deficit, with reserves of roughly $1.2 billion as of mid-2025. However, because the fund’s reserve ratio remained below the 0.7% benchmark, the solvency surcharge that was added to employer premium rates continues to apply in 2026. State projections show the surcharge is expected to phase out after 2026 as the trust fund continues to rebuild.
Colorado distributes annual rate notices to employers each December outlining the specific premium rates that will apply to them in the coming year. The rate is based on factors including an employer’s history of unemployment claims, current chargeable wage limits, and the overall health of the state’s unemployment insurance fund.
For more employer details on unemployment in Colorado, click here.
Colorado Nonprofit Employers Have Options
501(c)(3) organizations have a unique position in the tax structure. Unlike many other entities, these nonprofit organizations aren’t mandated to contribute to state unemployment taxes upfront. Instead, their obligation can be solely to reimburse the state for actual unemployment insurance claims connected to their organization.
This special provision for nonprofits offers a more direct approach to unemployment funding. By allowing nonprofits to “opt out” of the standard state unemployment tax system, they can choose to exclusively settle the specific unemployment claims attributed to their operations, effectively paying dollar for dollar for genuine claims only. This system often proves to be more cost-efficient for many nonprofits. On average, by leveraging this option, nonprofits can realize savings ranging from 30% to 60% compared to the standard State Unemployment Insurance (SUI) tax rates. This means that, not only do they have better control over their unemployment-related expenditures, but they also stand to conserve substantial funds which can be redirected towards their core mission and activities.
Colorado nonprofit employers have until December 1 to notify the state of their decision to reimburse rather than pay SUI taxes.
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(Image by Monstera Production, Ildigo from Pixabay)
The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.
