ESPN's Adam Schefter reported the two sides have the parameters of an agreement in principle, but Kaepernick must first agree to a restructured deal with Denver.
According to the report, before a deal is completed the 49ers, Broncos and Kaepernick have to agree on who will pay the quarterback's $11.9 million guaranteed salary for the 2016 season.
A source confirmed to ESPN that the Broncos are willing to pay $7 million, and Denver and Kaepernick would like the San Francisco to pay the remaining $4.9 million.
However, the 49ers have been unwilling to pay the difference and Kaepernick has been unwilling to forfeit the $4.9 million to make the deal work, according to the report.
The 49ers have granted Kaepernick's agents permission to seek a trade.
Kaepernick and Broncos executive vice president of football operations/general manager John Elway have met twice since March 15, according to the San Francisco Chronicle.
Kaepernick met with at Elway's house in the Denver area last Thursday, the same day Kaepernick's $11.9 million base salary became guaranteed for this upcoming season.
Kaepernick and Denver have made progress on the other years in the quarterback's contract, which runs through 2020, leaving the 2016 season as the only obstacle, according to the ESPN source.
Trevor Siemian, a 2015 seventh-round pick who didn't play a snap as a rookie, also is on the Broncos' roster.
New 49ers head coach Chip Kelly has said he hopes to have Kaepernick on the team.
"Have I done any selling? No. It's just been talking to him, and I don't think there's a selling part," Kelly said at the NFL meetings in Boca Raton, Fla., last month. "No. 1, I can't talk offensively with him and say, 'I think this is a good fit because of this, this and this' because you're not allowed to do that. But I did make him understand that just because there is a business side, it doesn't mean that we don't want you here. We want him. I really would love to work with him, so I think he understands that."
Kaepernick, 28, has been with the 49ers since they selected him in the second round of the 2011 NFL Draft. He played in only nine games last season due to a shoulder injury that landed him on injured reserve, and lost his starting job to Blaine Gabbert. Kaepernick finished with 1,615 passing yards, six touchdowns and five interceptions. In five seasons, Kaepernick has thrown for 10,030 yards with 56 touchdowns and 26 interceptions.