Colorado Moves Forward with Legislation to Limit Tax Deductions for Sports Betting
Colorado's Shift on Sports Betting Tax Deductions
Hey there! Colorado is giving sports betting operators a heads-up about changing the way they handle deductions for their reported net proceeds. A bill, known as Colorado House Bill 1311, has been in the works, and it's set to limit the deductions that sportsbooks have been enjoying.
Worth Noting
- The gradual removal of deductions for free bets starts on July 1, 2025, and will fully cease by July 1, 2026.
- The new legislative changes allocate over $17,000 to the revenue department for implementation.
Colorado House Bill 1311 has jumped through its third reading without any tweaks to its language. If this measure turns into law, it would reshape the way sports betting companies calculate their taxable proceeds, gradually eliminating existing deductions over the next two years.
Currently, the system in place—since Colorado voters approved a 10% tax on net sports betting proceeds back in 2019—allows operators to subtract costs such as federal excise taxes and free bet promotions. At present, everything from free bets to player winnings can be deducted from gross revenue to calculate the final taxable amount.
However, under HB 1311, things will start swaying come next year. The phase-out begins July 1, 2025, allowing operators to deduct only 2% of free bet amounts until the end of December. From January 1, 2026, to June 30, 2026, the deduction drops to 1%. After that, no free bet deductions will be on the table at all.
Ready to Roll with Katsubet5BTC or 111% + 111 Free Spins! Join NowThe main objective of the bill is to boost tax collections from sports betting activity. By trimming deductions, the state is optimistic about hacking more revenue to support public services.
One additional provision in HB 1311 covers administrative costs. It includes an appropriation of $17,135 to the Colorado Department of Revenue for personal services and IT system upgrades needed to enforce the new structure during the 2025-2026 fiscal year.
This move follows the footsteps of some states that are bending over backward to review and tighten how much sportsbooks can write off, particularly when it comes to promotions like free bets. States like Virginia and Michigan have already taken similar steps to enhance tax revenue from the betting sector.
As of now, HB 1311 is still spinning through the legislative process, although with no amendments made during its third reading, the current version seems to be edging closer to finalization.
Sports betting companies in Colorado, engaged in finance and business, might need to reconsider their strategies, as the gradual elimination of deductions for free bets from 2025, triggered by Colorado House Bill 1311, could impact their sports-related ventures, possibly prompting changes in spending patterns. This shift may mirror similar trends observed in states like Virginia and Michigan, where lawmakers have introduced measures to strengthen tax revenue from the sports betting industry.
