What Is The Cost Of Living In Colorado Vs. California? (Taxes, Housing & More)

Cost of living is a major factor that people use to determine whether they want to live in one place versus another. When it comes to Colorado vs. California, both states have much to offer outdoor enthusiasts – with Colorado’s winter adventures and California’s excellent year-round weather. Residents in both California and Colorado are drawn to their unmatched beauty, which is unique in their own right. But, how do these two states stack up in terms of cost of living?

The cost of living index in Colorado is 121.1, meaning it’s about 21% more expensive to live in Colorado than the national average (100). California, on the other hand, has a cost of living index of 149.9, so it’s more expensive than Colorado but both states are still well above the national average. The median price of a home in Colorado is $488,600, which is about 68% higher than the national average of $291,700. Meanwhile, the median home price in California is $684,800 – about 40% more than Colorado.

Aside from median housing prices, let’s examine how the cost of living compares in Colorado vs. California.

When you consider the fact the median home price in the state of Colorado is around 500,000, it is more affordable to purchase a home here than in California. In California, the median home price is nearly $700,000.

In May of this year, California’s median home price hit an all-time high and the state continues to be in an affordable housing crisis. As a result, many residents are heading to more rural locations from the major metropolitan areas to find cheaper homes. While bidding wars aren’t quite as intense as they used to be in California, homes are still seeing multiple bids. This is a direct result of increased demand, inflated asking prices, low supply, and record-low mortgage rates.

Like California, Colorado is experiencing a demand problem. With the state being such a desirable place to live, everyone wants to move there. This has caused Colorado to become one of the most expensive housing markets in the nation. During the COVID-19 pandemic, people flooded into Colorado at record rates and apartment-dwellers pursued more square footage. In Denver, the amount of money bid over the asking price is also experiencing record-high levels.

Food and grocery price index are another factor that influences the cost of living. If you chose to live in Colorado over California, you’re looking at spending about three to four percent less on groceries.

California’s grocery cost index is only slightly higher than the national average of 100 – sitting at approximately 105.1. Colorado’s grocery index, on the other hand, is essentially on par with the national average at 100.7. Refer to the following table for a more comprehensive comparison of the average prices for a variety of food items in Colorado vs. California:

Colorado boasts one of the lowest income tax rates in the nation. Unlike California, Colorado has a flat income tax. This means that, regardless of your income level, you’ll pay a flat rate of 4.63%. Eight other states in the country have a flat income tax rate, and Colorado is considered to be in the middle of the pack.

California, however, has what’s known as a progressive income tax. This means that the rate is lower for lower earners and higher for higher earners. California has a total of 10 official income brackets that range from as low as 1% to as high as 13.3%. The state’s top marginal rate is the highest in the country, but it only applies to those that make over $1 million of taxable income.

While most states charge a sales tax for goods and services, California has an entirely different approach. At 7.25%, the minimum sales tax in California is one of the highest in the country. However, some counties and cities across the state have even higher rates. In fact, less than half the cities in California actually have a sales tax of 7.25%. For instance, Los Angeles County has a sales tax of 9.5%, but neighboring Culver City has a sales tax of 10.25%.

Among states that have a sales tax, Colorado is the lowest in the country – at just 2.9%. Though, like California, because of the numerous extra city and county sales taxes, actual combined rates may be as much as 11.2%. For example, Boulder County’s sales tax rate is almost 5% and San Juan County is 9.4%.

Fortunately, Colorado has one of the lowest property taxes in the nation. The average effective rate in Colorado is just 0.49% and in some areas, the property taxes are even lower. For example, Colorado’s Gilpin County has a property tax rate of just 0.23%. Meanwhile, California’s maximum allowable property tax rate is 1% of the home’s assessed value and the average effective rate is 0.73%.

Proposition 13, passed in 1978, also limits increases on assessed value to 2% each year, unless the home has undergone construction or changed ownership. This law has helped to keep property tax payments in California below the national average, and in some cases, this is pretty significant.

Living in Colorado or California is comparatively more expensive when you consider the national cost of living index of 100. However, when you stack these two states against each other, it is about 24% more expensive to live in California than Colorado. A large majority of the cost savings in Colorado comes from the more affordable housing, with Colorado being about 16% more inexpensive.

While transportation and childcare tend to rank more expensive in Colorado, groceries, food, entertainment, and pretty much everything else is cheaper in Colorado than California.