Colorado Employer Guide

Colorado Household Employer Guide 2026

Your household employee — a nanny, caregiver, housekeeper, gardener, or anyone who works in your CO home — is a W-2 employee. Colorado adds three live state programs to track: CO FAMLI paid family leave (employee withholding), the Healthy Families & Workplaces Act sick leave, and city minimum wage premiums. Here's everything you need for 2026.

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✓ Updated May 2026 · Verified against Colorado Department of Labor & Employment (CDLE), CO FAMLI, CO Department of Revenue, and IRS
Colorado has four state and city programs to know about. (1) CO FAMLI — Paid Family & Medical Leave Insurance, live since Jan 2024. Households (always small employers, <10 workers) pay the 0.44% employee share only. (2) HFWA — Healthy Families & Workplaces Act, statewide paid sick leave (1 hour per 30 hours worked, up to 48 hours/year). (3) City minimum wages — Denver, Boulder, and Edgewater all exceed the state $15.16 floor. (4) City Occupational Privilege Taxes (OPT) — Denver, Glendale, Greenwood Village, and Sheridan each charge a flat monthly per-employee head tax that Nest withholds when your household is in those cities. CO state income tax (4.4% flat) exists but withholding is voluntary for household employers.
Your household worker is a W-2 employee. Whether they're a nanny, caregiver, housekeeper, gardener, or personal assistant — if you control when, where, and how the work is done, they are your employee under IRS rules. That means W-2 reporting, payroll tax compliance, and Colorado labor law obligations. Most household workers are employees under IRS rules, not contractors — issuing a 1099 in this situation can lead to back tax penalties, interest, and wage-law liability under both federal and Colorado law.

When the rules apply

Each tax threshold is a trigger. Once you cross one, the corresponding taxes apply to the wages that triggered the crossing — not just the amount above the threshold.

Federal thresholds
$1,000
per quarter
Cash wages to all household employees combined. Triggers: pay federal Unemployment Tax (FUTA — 6% on the first $7,000 per employee, with state credit). Report on Schedule H with your 1040.
$3,000
per year, per employee
Cash wages to a single household employee in the calendar year. Triggers: withhold and pay FICA (Social Security 6.2% + Medicare 1.45%). Report wages to the Social Security Administration via W-2 and W-3.
Colorado state thresholds
$1,000
per quarter
Cash wages to all household employees combined. Triggers: register with the Colorado Department of Labor & Employment (CDLE) for state Unemployment Insurance and CO FAMLI. Begin withholding the 0.44% FAMLI employee share from each paycheck.
40 hr/wk
or 5+ days/wk
Workers' compensation insurance trigger (CRS 8-40-302). Colorado requires workers' comp coverage for any household employee who works 40+ hours per week OR 5+ days per week (whichever you cross first). Most full-time household workers cross this threshold; part-time arrangements may not.

How Nest Payroll handles this

Each pay period, you pay your employee the net amount directly — through Venmo, Cash App, Zelle, your banking app, or by check. We calculate accurate withholdings on every pay stub from day one. Once you cross the $1,000 quarterly threshold, we register you with CDLE for state UI and FAMLI.

Federal taxes — quarterly EFTPS payments

At the end of each federal quarter (March, May, August, December), Nest debits your bank account for the federal taxes owed — FUTA, employer + employee FICA, and any federal income tax withheld — and remits them to the IRS via EFTPS. You'll get a confirmation email a week beforehand. Your money stays in your account until taxes are actually due. We don't hold withholdings on your behalf. At year-end, Schedule H on your Form 1040 reconciles everything Nest already paid through the year; Nest produces a signature-ready version.

Colorado state taxes — quarterly UI + FAMLI + OPT

Each quarter, Nest files three state returns on your behalf. With CDLE: the UITR-1 for state UI tax (an employer-paid contribution, not withheld from your employee) and the CO FAMLI return (carrying the 0.44% employee share you've been withholding through the year). With city tax authorities: if your household is in Denver, Glendale, Greenwood Village, or Sheridan, Nest also files quarterly Occupational Privilege Tax (OPT) returns with that city.

Colorado UI Tax — 2026 rates: The new employer rate is industry-based (typically ~3.05% for service-industry classifications) on the first $30,600 of each employee's wages — an employer-paid tax (not withheld from your employee). The wage base increased from $27,200 in 2025. After several reporting periods, CDLE may reassign you an experience-based rate. Nest Payroll calculates and remits this with your quarterly UITR-1 filings. Source: CDLE — Unemployment Insurance Premiums
Colorado state income tax — 4.4% flat: Colorado applies a flat 4.4% personal income tax. The state withholding certificate is Form DR-0004. Source: CDOR — DR-0004 Employee Withholding Certificate
CO FAMLI — 2026 rate 0.88%: Colorado Paid Family & Medical Leave Insurance (FAMLI) has been live since January 2024. Total premium is 0.88% of gross wages, capped at the Social Security base ($184,500 for 2026). The split is 0.44% employee / 0.44% employer — but household employers (with fewer than 10 employees) are exempt from the employer share. So in practice, you withhold 0.44% from your employee's gross wages and remit it to CDLE with your quarterly FAMLI return. You can voluntarily pay the full 0.88% as an employee benefit. Source: CO FAMLI — Employers
City Occupational Privilege Tax (OPT) — flat monthly per-employee tax: Four Colorado cities charge an Occupational Privilege Tax — a flat monthly head tax that's owed when an employee earns above a city-specific monthly wage threshold. Nest Payroll automatically withholds the OPT employee share when your household is in one of these cities:
2026 CO Occupational Privilege Tax Rates
CityEmployee monthlyEmployer monthlyWage threshold
Denver$5.75$4.00$500/month
Glendale$5.00$5.00$750/month
Greenwood Village$2.00$2.00$250/month
Sheridan$3.00$3.00$500/month

Note: Aurora repealed its OPT effective January 1, 2025 — no longer collected. Boulder, Edgewater, and most other CO cities do not impose OPT.

Sources: Denver Tax Guide #61 — OPT · Aurora OPT Repeal Notice
End-of-year reconciliation: If you didn't cross the federal FICA threshold ($3,000/year per employee — most common when families start payroll late in the year or hire short-term help), we'll let you know exactly what was withheld but doesn't need to be remitted. You return those amounts to your employee, and we file accordingly.

Setup checklist (before they start)

The one-time tasks that need to be done before — or shortly after — your household employee's first day.

Workers' Compensation Insurance

Under CRS 8-40-302, Colorado requires workers' compensation coverage for any household employee who works 40 hours or more per week OR 5 or more days per week. Most full-time nannies, caregivers, and housekeepers cross this threshold; occasional or part-time helpers may not.

Even if you fall below the threshold, we strongly recommend obtaining coverage anyway. Workers' comp protects you from liability if your employee gets injured or sick on the job.

  • Homeowner's or renter's insurance rider — call your insurance company first. Many policies include or can add household-employee coverage as a low-cost rider.
  • Pinnacol Assurance or other private carrier — if your homeowner's policy can't cover it.
Resource: CDLE — Division of Workers' Compensation — employer guidance and carrier options.

Form I-9 (Employment Eligibility)

Federal law requires all employers to verify employment eligibility using Form I-9. Complete this before your household employee's first day of work.

Important: Don't submit the I-9 to anyone. Keep it with your employer records in case of a future audit.

Federal W-4 (and optional Colorado DR-0004)

The federal W-4 determines how much federal income tax to withhold from each paycheck. Have your household employee fill this out at hire and any time their situation changes.

Colorado's Form DR-0004 is optional — it lets your employee fine-tune their CO withholding (claim itemized deductions, the CO child tax credit, or account for additional non-withheld income). The federal W-4 is sufficient on its own.

Both federal and Colorado income tax withholding are voluntary for household employers. Each requires mutual agreement between you and your employee. Most household workers prefer to have both withheld so they don't owe at tax time. If you skip CO withholding, your employee makes their own quarterly estimated payments to the Colorado Department of Revenue.

Colorado New Hire Reporting

Colorado employers must report newly hired and rehired employees to the Colorado State Directory of New Hires within 20 days of the hire date. Reporting can be done online, by mail, or by fax.

With Nest Payroll: We handle Colorado new-hire reporting automatically when you add your employee in the app.

Wage Notice + Equal Pay for Equal Work Act

Colorado employers must communicate wage rate, payday, and basic terms to employees in writing at hire (per CDLE wage rules).

The Equal Pay for Equal Work Act (EPEWA) — Colorado's wage transparency law — requires that any job posting include the hourly wage or wage range, a general benefits summary, the application deadline, and instructions on how to apply. This applies to household-employer postings too — for example, a Care.com or Sittercity listing.

Practical example: If you post a nanny job on Care.com, include something like "$22–$26/hr DOE; paid sick leave per Colorado HFWA; CO FAMLI; PTO discussed at hire." This satisfies EPEWA's transparency requirement. Source: CDLE — Equal Pay for Equal Work Act

Required Employment Posters

Colorado requires several workplace posters. For a household employer with a single worker, you can satisfy this by emailing or texting links, or printing physical copies:

📋 CDLE Required Posters 📋 CO FAMLI Notice 📋 Federal Minimum Wage (FLSA) 📋 EEOC Know Your Rights

Written Work Agreement

Colorado state law doesn't require a written employment agreement, but a written contract prevents misunderstandings about hours, duties, PTO, and house rules.

Build a free contract with our editable template: Nest Payroll Household Employee Contract Builder — fill it out and download as a PDF.

Hand In Hand, a non-profit supporting domestic employers and employees, also offers free sample contracts and guidebooks.

Pay & compensation

Everything that goes into a paycheck — minimum wage, overtime, when to pay, pay stubs, and reimbursable mileage.

Minimum Wage — $15.16/hr (2026)

Colorado's statewide minimum wage is $15.16/hour for 2026 (up from $14.42 in 2025; CPI-indexed annually under Amendment 70). Several cities require higher local minimums — when state and local minimums differ, employers must pay the higher rate.

2026 Colorado Minimum Wages — by jurisdiction
LocationRate (Household Employer)
Denver (City & County)$19.29/hr
Edgewater$18.17/hr
Boulder (City & unincorporated County)$16.82/hr
Rest of Colorado$15.16/hr
Sources: CDLE — COMPS Order · EPI Minimum Wage Tracker

Overtime

For household workers, Colorado follows the federal Fair Labor Standards Act (FLSA) standard: 1.5× the regular hourly rate for all hours worked over 40 in a 7-day workweek. Colorado's COMPS Order has a stricter 12-hour-daily rule for non-domestic workers, but household domestic-service workers are largely exempt from those daily rules.

Colorado Overtime — Household Workers
ConditionRate
Live-out, more than 40 hours in a workweek1.5× hourly
Live-in employees (any hours)Exempt from overtime
Work performed on a holiday or weekendNo premium required
Live-in exemption: Under federal FLSA — which Colorado follows for household domestic workers — live-in employees are exempt from overtime requirements. Live-in nannies and caregivers must be paid at least minimum wage for all hours worked, but overtime is not legally required. This is a meaningful difference from California, New York, and Maryland, which require overtime for live-in workers. Source: U.S. DOL — Fair Labor Standards Act

"No Tax on Overtime" Deduction (2025–2028)

Under the One Big Beautiful Bill Act (OBBBA), signed July 2025, your household employee may be able to deduct the premium portion of their overtime pay — the "half" in time-and-a-half — from their federal taxable income.

OBBBA Overtime Deduction — Key Details
DetailValue
What's deductibleOnly the premium (0.5×) portion of FLSA overtime
Max deduction (single)$12,500/year
Max deduction (joint)$25,000/year
Income phaseout$150,000 MAGI ($300,000 joint)
DurationTax years 2025–2028
Good news for Colorado employers: Because CO household worker overtime follows the federal FLSA standard (40 hours/week), virtually all overtime your household employee earns qualifies for the OBBBA deduction. Source: IRS — OBBBA Tax Deductions
W-2 reporting (starting 2026): Employers must separately report qualified overtime compensation on Form W-2 using Box 12, code "TT." This is a new requirement — for tax year 2025, employers were given transitional relief from this reporting.

Pay Frequency

Household employees are virtually always hourly under federal FLSA — even when you've agreed to pay a "salary," it's treated as a wage covering a fixed number of hours per week, with overtime owed on hours past 40. Colorado allows household employers to pay daily, weekly, bi-weekly, semi-monthly, or monthly. Common household schedules:

  • Weekly — every Friday, the most common cadence for nannies and caregivers
  • Bi-weekly — every other Friday
  • Semi-monthly — 1st and 15th, or 15th and end-of-month

Designate your regular payday in writing at hire — even a simple email or text confirming "you'll be paid every Friday" satisfies this.

With Nest Payroll: Nest defaults to weekly pay stubs, which works well within any pay frequency you choose. The weekly pay stub is your record of what was earned; the bank transfer is whenever you want to move the money — as long as it follows the regular payday cadence you designated at hire.

Mileage Reimbursement

Colorado doesn't require mileage reimbursement, but you must reimburse necessary work-related driving expenses if those costs would otherwise reduce your employee's wages below the minimum wage. Most employers use the IRS standard rate:

$0.725 per mile (2026)

Common examples: driving children to activities, running household errands, taking a client to medical appointments. (Commuting to/from work doesn't count.)

Paystub Requirements

Colorado requires an itemized statement with each paycheck showing: gross wages, total hours worked, all deductions itemized, and net pay. Records must be retained for at least 3 years.

With Nest Payroll: Nest generates a compliant itemized pay stub for every weekly pay period — automatically. Each stub shows the rate, gross wages, FICA, federal income tax (if elected), CO state income tax (if elected), the 0.44% CO FAMLI deduction, the city OPT deduction (if applicable), net pay, and hours worked. You can email each stub to your employee directly from the app, or download a PDF.

This is a lot to track on your own.

Nest Payroll handles federal and CO payroll, FAMLI withholding, W-2s, and Schedule H — starting at $42/mo. 14-day free trial.

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Time off & leave

Sick leave, vacation, and Colorado's Paid Family & Medical Leave Insurance (FAMLI) program.

Paid Sick Leave (Healthy Families & Workplaces Act)

Under the Colorado Healthy Families and Workplaces Act (HFWA), every household employer must provide paid sick leave to their employee at the rate of 1 hour per 30 hours worked, up to a maximum usage of 48 hours per year. Sick leave can be used for the employee's own illness or care, family member care, public health emergencies, or domestic violence-related needs.

Employees are eligible from day one — there's no waiting period. Records of accrual and usage must be maintained.

Accrual vs. frontloading — and why frontloading is simpler

Colorado gives you two ways to provide sick leave:

Accrual
The default
Sick time builds up at 1 hour per 30 hours worked. Requires careful tracking, accrual carryover into the next year, and unused-time reconciliation.
Frontloading
Recommended
Provide the full 48 hours upfront at the start of each year (or pro-rated at hire). The employee has access to all hours on day 1 — no per-hour tracking, no carryover.

Frontloading is generally better for household employers for three reasons:

  • No accrual tracking. You don't need to monitor the 1-per-30 rate or true-up at year end.
  • No payout at separation. Frontloaded statutory sick leave doesn't have to be paid out when the employee leaves — that's true universally, in every U.S. state, including under HFWA.
  • Annual reset. Frontloaded sick leave can reset to the full annual amount each year — CDLE explicitly allows annual reset for frontloaded sick leave under HFWA, in contrast to accrued sick leave which carries over.
How Nest Payroll handles this: Nest is built around the frontloading model — you set your employee's 48-hour annual sick leave balance at the start of each year (or pro-rated at hire), and pay stubs reflect the running balance as time is used. This is the simplest and lowest-risk approach for household employers. Source: CDLE — Healthy Families & Workplaces Act

Vacation & PTO

Colorado does not require paid vacation, but if you offer it, CO treats accrued vacation as earned wages under the Colorado Wage Claim Act (CRS 8-4-101(14)). This is the same framework as California's §227.3 and Massachusetts's §148: once vacation is earned, it cannot be forfeited — accrued-but-unused vacation must be paid out at separation as wages owed.

The Colorado Supreme Court's 2021 decision in Nieto v. Clark's Market made this absolute: forfeiture clauses ("use it or lose it") are void and unenforceable in Colorado, even if your written policy clearly says otherwise. CDLE's regulations (7 CCR 1103-7) reinforce this — any vacation accrued is owed at separation, no exceptions.

The calculation at separation is the earned-but-unused portion through the last day worked, at the final rate of pay. Vacation accrues pro-rata as labor is performed — not in a lump sum at year start, even if you frontloaded it.

Edge cases worth knowing:
  • Keep sick separate from vacation. If you combine sick and vacation into a single "PTO" bank, the entire balance gets characterized as vacation under the Colorado Wage Act — converting the no-payout sick portion into payable wages at separation. Track sick and vacation as separate buckets on the pay stub.
  • Forfeiture isn't an option in Colorado. "Use it or lose it" policies are not enforceable for vacation that's already been earned, even with a written policy at hire. You can cap maximum accrual or cap how much vacation you offer per year — but already-earned vacation belongs to the employee.
  • Vacation pays pro-rata, not the full balance. If you frontloaded 80 hours on January 1 and your employee leaves June 30 having used 16 hours, you owe 24 earned-but-unused hours (40 earned at half-year × pro-rata, minus 16 used) — not the full 64 unused hours.
  • Penalties for nonpayment. Under CRS 8-4-109, an employer who fails to pay accrued vacation within 14 days of a written demand can owe up to 200% of unpaid wages plus attorneys' fees. Colorado wage enforcement is among the most aggressive in the country.

See our Frontload PTO Payout guide for the full pro-rata framework, worked example, and tax treatment.

Source: CDLE — Vacation Pay

Colorado FAMLI (Paid Family & Medical Leave)

Colorado's Paid Family and Medical Leave Insurance (FAMLI) program has been live since January 2024. It provides up to 12 weeks of paid leave per year for: bonding with a new child, recovering from a serious health condition, caring for a family member, or military family events. Plus an additional 4 weeks for pregnancy or childbirth complications.

2026 CO FAMLI Details
DetailValue
Total premium rate0.88% of gross wages
Employee share (premium split)0.44% — i.e., 0.44% of gross
Employer share — small employer (<10 employees)$0 — exempt
Employer share — large employer (10+)0.44% (households rarely qualify)
Wage capSocial Security wage base ($184,500 for 2026)
Eligibility$2,500+ in CO wages over the prior 5 calendar quarters
Maximum weekly benefit$1,381.45/week
What this means for household employers: Withhold 0.44% of your employee's gross wages on every paycheck and remit it with your quarterly FAMLI return. You can voluntarily pay the full 0.88% as an employee benefit.
With Nest Payroll: The CO FAMLI deduction is calculated automatically on every pay stub at 0.44% of gross wages, capped at the SS wage base. Your quarterly CDLE filing includes the FAMLI remittance. If you elect to absorb the full 0.88% as a benefit, tell us at signup and we configure the account that way. Source: CO FAMLI — Employers

Upon departure

Final wages — strict CO timing (CRS 8-4-109):

  • If you terminate the employee: wages due immediately. If your payroll is offsite, you have until the close of the next business day. This is one of the strictest final-pay rules in the country.
  • If the employee resigns: wages due on the next regular payday.

Earned-but-unused vacation: Per CRS 8-4-101(14) and Nieto v. Clark's Market, accrued vacation pay must be paid out at separation regardless of any forfeiture clause. Calculate the earned-but-unused portion pro-rata through the last day worked at the final rate of pay. Frontloaded statutory sick leave doesn't have to be paid out (universally true, every state). See Vacation & PTO above and our Frontload PTO Payout guide for details.

Final W-2: Provide the federal Form W-2 by the regular January 31 deadline (or earlier if requested by the former employee).

Year-end forms

Your responsibilities

  • Hand the W-2 to your household employee by January 31 — Nest produces this; you deliver it (CO FAMLI deduction typically reported in Box 14)
  • Attach Schedule H to your Form 1040 by April 15 — Schedule H reconciles the federal taxes Nest already paid quarterly through EFTPS; Nest produces a signature-ready version

What Nest handles for you

  • Quarterly federal tax payments to the IRS via EFTPS (FUTA, employer + employee FICA, federal income tax withheld)
  • W-3 + Copy A of W-2 filed with the Social Security Administration
  • Quarterly UITR-1 filings with CDLE for state UI tax
  • Quarterly CO FAMLI return with CDLE
  • Quarterly OPT filings with the relevant city tax authority (Denver, Glendale, Greenwood Village, or Sheridan) — only if your household is in one of those cities
With Nest Payroll: Your tax forms are generated automatically and appear in your Tax Summary by the end of January.
Bonuses, vacation payouts, and other supplemental wages. Nest uses the aggregate method for federal income tax withholding: bonuses, PTO payouts, and other supplemental wage payments are combined with regular wages and withheld at the worker's regular W-4 rate — not the flat 22% federal supplemental rate. For most household workers, this produces a slightly larger net check than the flat method would.

Tax breaks for household employers

Paying your household employee legally unlocks meaningful federal tax breaks that often offset most of your employer-side payroll tax cost.

Dependent Care FSA (DCFSA)

For 2026, the federal max contribution is $7,500 (married filing jointly) — up significantly from prior years under the OBBBA. Note: your employer's specific plan may still cap at $5,000.

Child & Dependent Care Tax Credit

Up to 50% of qualifying care expenses for 2026 — up from 35% in 2025. Capped at $3,000 of expenses for one qualifying child or $6,000 for two or more. At the 50% rate, a family with two or more dependents could receive a credit of up to $3,000.

→ See our complete guide to nanny tax breaks — includes DCFSA, Care Credit, EAP (Educational Assistance Program), and ICHRA (health reimbursement).

Resources & free tools

🧮 Payroll Calculator 🧮 Gross-Up Calculator 🧮 Tax Catch-Up Calculator 📄 Free Contract Builder 💡 Tax Breaks Guide 📅 2026 Tax Update 📖 Household Payroll 101 ⏰ Catch-Up on Back Taxes 📊 All 50 State Guides 🤝 How to Hire a Nanny

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Nest Payroll handles EIN setup, CDLE registration, FAMLI withholding, payroll calculations, and quarterly filings — all automatically. 14-day free trial.

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Disclaimer: The information on this page is general in nature. This is not tax, legal, benefits, financial, or HR advice. Rules and regulations change over time and vary by location. Workers' compensation, FAMLI, the HFWA sick leave requirement, and CO's strict final-pay rule can be complex — consult an attorney, financial advisor, or licensed insurance broker for your specific situation.