Live in Colorado, Work in Michigan: Which State Taxes Your Paycheck?
Answer
You file twice: Michigan first, then Colorado. There is no reciprocity agreement between these two states, so Michigan taxes the income where it was earned and Colorado taxes it again as resident income — with the resident credit removing the double charge rather than an exemption form preventing it.
Last verified
Two states can lawfully tax the same wages: Michigan because the work happened there, Colorado because you live there. Nothing prevents the overlap in advance — it is unwound afterwards, on the Colorado return, through the credit for taxes paid to another state.
A Colorado resident taxed by another state on the same income claims the credit for taxes paid to other states on Form DR 0104CR. The credit is capped at the Colorado tax on that income, so it removes the double tax but never refunds the excess when the other state charges more.
Michigan also has a layer below the state one, and it is the layer that survives every agreement: Two dozen Michigan cities levy their own income tax, Detroit among them, and the state reciprocal agreements do not cover city tax. A reciprocal-state resident working in Detroit still owes Detroit.
What you file
- 1Nonresident return · MichiganForm MI-1040 with Schedule NR
File the Michigan nonresident return FIRST — you need the Michigan tax figure before you can complete Colorado.
- 2Resident return · ColoradoForm DR 0104CR
File a Colorado resident return reporting all income, then claim the credit for tax paid to Michigan. The credit is capped at what Colorado would have charged on that same income, so if Michigan taxes it at a higher rate the difference is not refunded.
The two states, side by side
| Colorado | Michigan | |
|---|---|---|
| Taxes wages | Yes — flat | Yes — flat |
| Reciprocity partners | None | 6 (Form MI-W4) |
| Convenience rule | No | No |
| Nonresident return | Form DR 0104 with Schedule DR 0104PN | Form MI-1040 with Schedule NR |
| Credit for other-state tax | Form DR 0104CR | Form MI-1040 (credit for income tax imposed by another state) |
| Nonresident safe harbour | None published | None published |
| Local income tax | Yes | Yes |
| Revenue department | Colorado Department of Revenue — Taxation Division | Michigan Department of Treasury |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Michigan and working in Colorado gives:Both states — credit offsets the double tax.
Same two states, different situation
The withholding answer turns on how you are paid and where the work happens, not only on which two states are involved.
- Remote worker: Colorado → MichiganHome state only
- 1099 contractor: Colorado → MichiganHome state, plus the client state if you work there
- Moved mid-year: Colorado → MichiganTwo part-year returns
Other Colorado pairs
Questions people actually ask
I live in Colorado and work in Michigan. Which state takes the tax out of my paycheck?
You file twice: Michigan first, then Colorado. There is no reciprocity agreement between these two states, so Michigan taxes the income where it was earned and Colorado taxes it again as resident income — with the resident credit removing the double charge rather than an exemption form preventing it.
Which state should my employer be withholding for?
Michigan. The wages are sourced to Michigan, so Michigan withholding is correct and there is no Colorado withholding to set up.
Will I end up paying tax twice on the same income?
Not twice over, but you will pay the higher of the two rates. Colorado gives residents a credit for tax paid to Michigan on the same income, claimed on Form DR 0104CR. The credit is capped at the Colorado tax on that income, so if Michigan taxes it more heavily the excess is not refunded by either state.
How current is this?
The Colorado and Michigan rules on this page were last checked against Colorado Department of Revenue — Taxation Division and Michigan Department of Treasury on 2026-08-07. We re-check the full grid every December after state legislative sessions close, and re-check the convenience-of-the-employer states quarterly because that is where the rules move fastest.
Sources
Every fact above comes from the revenue department that publishes the rule. We do not cite secondary summaries, and we do not restate a figure we could not find at source.
- Colorado Department of Revenue — Taxation Division — individual income taxaccessed 2026-08-07
- Michigan Department of Treasury — individual income taxaccessed 2026-08-07