Chapter 30 · Colorado law and practice
Colorado Closing, Settlement, and Tax Calculations
5 min read · 1 checkpoint · Colorado law as of the September 20, 2026 edition
Edition date September 20, 2026. This chapter states Colorado law and forms as verified for that edition. Check the current rules, forms, and candidate bulletin before relying on a version-sensitive requirement.
On this page
Turn the contract into a balanced settlement
Closing implements the agreement; it should not secretly invent a different one. Compare the price, earnest money, loan, seller concessions, compensation, costs, Proration Allocation of a recurring amount between parties or periods. See Chapter 17. Glossary, deposits, and possession terms with the signed documents. The broker's review duty remains relevant even when a Title The legal ownership interest or rights in property, distinct from the deed documenting transfer. See Chapter 7. Glossary company conducts settlement. CO07
A buyer Debit A charge to a party on a settlement statement. See Chapter 17. Glossary is an amount charged to the buyer. A buyer credit is an amount reducing the cash the buyer must bring. A seller credit increases the seller's proceeds; a seller debit reduces them. One person's debit is often another person's credit, but some expenses are paid to third parties instead. Never force a four-column offset where the charge is actually a Recording Placing an instrument in the authorized public record system. See Chapter 7. Glossary fee or lender cost paid outside the other party's proceeds.
Core equations.
Buyer cash to close = buyer debits − buyer credits.
Seller net proceeds = seller credits − seller debits.
A lender's Escrow Holding funds or documents subject to authorized conditions. See Chapter 17. Glossary reserve is not the same as the seller–buyer proration of the current year's property tax. Earnest money already held is a buyer credit at closing, not an additional down payment to be charged twice.
Good funds, instructions, and fraud prevention
Follow Colorado's applicable good-funds requirements and the settlement provider's verified instructions. An ordinary personal check is not automatically interchangeable with a qualifying wire or cashier's check. Signing documents does not necessarily mean that usable funds have arrived or disbursement is authorized. CO11
A changed wire instruction is a fraud warning, not a reason to hurry. Verify through an independently established contact channel. Do not use the telephone number in the suspicious message as the sole verification source. These are practical controls; they do not replace the closing company's requirements or the broker's duties.
Prorations: decide ownership of time before calculating
First identify whether the amount is prepaid or unpaid, who paid or will pay it, the covered period, the closing-day allocation, and the required day-count basis. For the examples in this chapter, the closing day belongs to the buyer unless expressly stated otherwise. This is a stated calculation convention, not an assertion that every Colorado agreement or examination problem uses identical instructions.
The 2026 residential contract supplies selections for tax and rent Proration Allocation of a recurring amount between parties or periods. See Chapter 17. Glossary and states that prorations are final unless otherwise specified. Use the completed agreement and the question's directions. Do not import a 360-day convention when the problem specifies actual days, or assume a seller gets reimbursement for association reserves where the documents do not provide it. CO11
Example 1: unpaid annual taxes. Closing is July 1 in a 365-day year. Annual taxes used for the agreed proration are $3,650 and will be paid by the buyer later. Seller's period is January 1 through June 30: 181 days. Daily amount is $10. Seller owes $1,810, so Debit A charge to a party on a settlement statement. See Chapter 17. Glossary seller and credit buyer $1,810. This credit compensates the buyer for paying a bill that includes the seller's period; it is not an extra tax imposed at closing.
Example 2: prepaid rent. A tenant paid $2,100 for a 30-day month. Closing is the 11th, the buyer receives rent from the closing day onward, and the seller collected the whole month. Buyer is entitled to 20 days × $70 = $1,400. Debit seller and credit buyer $1,400.
Example 3: prepaid association dues. Seller paid $360 for a 30-day month and closing is the 16th. Buyer owes for 15 days: $180. Credit seller and debit buyer $180. This direction is opposite the prepaid-rent example because one is an expense and the other is revenue.
Colorado nonresident withholding
C.R.S. § 39-22-604.5 provides for withholding in covered nonresident transfers through settlement: the lesser of 2% of the sales price or the seller's net proceeds, subject to statutory exceptions. A sale price not exceeding $100,000 is one exception; certain properly supported affirmations also matter. Do not call this a tax of 2% of the seller's profit or confuse it with federal FIRPTA Federal rules concerning tax and withholding on specified foreign dispositions of U.S. real property interests. See Chapter 20. Glossary. CO17
Example 4. A covered nonresident sale is $600,000 with $80,000 net proceeds before this withholding. Two percent of price is $12,000; compare with $80,000 and withhold $12,000.
Example 5. Same price, but only $7,000 net proceeds. The lesser amount is $7,000. It is not 2% of $7,000, and the withholding is not automatically a final determination of income-tax liability.
Residence, principal-residence treatment, entity facts, and an affirmation of no reasonably estimated tax can affect the analysis. The settlement provider and tax adviser should apply the current forms and instructions. A broker should spot the issue without inventing a tax exemption for a Client A represented principal in a brokerage relationship. See Chapter 8. Glossary.
Documentary fee, local charges, and assessment math
Colorado's Documentary fee Colorado’s statutory fee on certain recorded conveyances, distinct from recording charges, local transfer taxes, and seller income taxes. Glossary applies to covered recorded conveyances with Consideration Bargained-for legal value supporting an agreement. See Chapter 10. Glossary exceeding $500, at one cent per $100 or major fraction of consideration under the statute. It is separate from Recording Placing an instrument in the authorized public record system. See Chapter 7. Glossary charges and any applicable local transfer tax. Avoid silently applying another state's transfer-tax rate. CO18
Example 6. At an exactly divisible $485,000 consideration, the fee calculation is 4,850 × $0.01 = $48.50. The seller's Equity The owner's economic interest after relevant debt or claims are considered. See Chapter 15. Glossary and mortgage payoff are not the base. For consideration not evenly divisible by $100, follow the statute and the recorder's applicable calculation rather than assuming every fractional hundred is rounded upward.
For a tax-assessment problem, use the supplied valuation, Assessment A valuation or charge under a tax or improvement system; context determines meaning. See Chapter 20. Glossary percentage, and Mill One dollar of tax per $1,000 of taxable value. See Chapter 20. Glossary levy. One mill is $1 per $1,000 of assessed value. Colorado assessment formulas and relief provisions can change, so these exercises deliberately supply the assumed rate instead of teaching one rate as permanent.
Example 7. A hypothetical taxable assessed value is $36,000 and the combined levy is 82 mills. Tax is $36,000 × 0.082 = $2,952. Do not multiply by 82 as though it were 82 dollars per assessed dollar.
An integrated closing problem
Assume a $500,000 purchase; a $400,000 new loan; $15,000 earnest money already deposited; $4,000 buyer costs; and a $1,200 seller-to-buyer tax credit. There are no other buyer entries.
Buyer Debit A charge to a party on a settlement statement. See Chapter 17. Glossary: $500,000 + $4,000 = $504,000.
Buyer credits: $400,000 + $15,000 + $1,200 = $416,200.
Buyer cash to close: $87,800.
For the seller, assume a $310,000 loan payoff, a hypothetical negotiated $20,000 total brokerage compensation, $2,000 other seller costs, and the same $1,200 tax debit. There are no additional seller entries.
Seller proceeds: $500,000 − $310,000 − $20,000 − $2,000 − $1,200 = $166,800.
The buyer's $400,000 loan is not a seller debit. The $15,000 earnest deposit is part of payment of the purchase price, not an extra seller bonus. A seller loan payoff reduces cash proceeds but does not, by itself, establish taxable gain.
Final settlement review
Check names, authority, legal description, Deed An instrument used to convey an interest in real estate. See Chapter 7. Glossary selection, money sources, Lien A security claim or charge against property for an obligation. See Chapter 5. Glossary releases, charges, credits, Proration Allocation of a recurring amount between parties or periods. See Chapter 17. Glossary, withholding, signature completeness, and possession documents. Identify discrepancies before authorizing a rushed workaround. A hidden rebate or undisclosed seller payment can mislead the lender even if both buyer and seller agreed to it.
Rework every example with changed figures. Before using a calculator, state who owes whom and what the base is. An accurate multiplication using the wrong base remains a wrong answer.