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Colorado sportsbooks will soon lose a key tax break as Governor Jared Polis signed House Bill 1311 into law on May 15. The measure phases out promotional bet deductions, which currently allow operators to reduce their taxable revenue by writing off non-cash bonuses like free bets.
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Currently, Colorado applies a 10% tax on sports betting revenue. Operators have been allowed to subtract promotional wagers from their taxable total, with a cap on deductions set at 2.25%. That cap was already scheduled to decrease in phases—dropping to 2% in July 2025 and 1.75% in early 2026.
House Bill 1311 accelerates the phase-out. Beginning January 1, 2026, sportsbooks will only be allowed to deduct up to 1% of their revenue through promotions. By July of that year, all such deductions will be eliminated entirely.
Earlier drafts of the bill suggested removing deductions as soon as September 2024, but lawmakers pushed the date back to allow operators more time to adjust. The bill passed with broad support, clearing the House 52–13 and the Senate 28–7.
The legislative change follows last year’s ballot measure that removed the $29 million cap on how much tax revenue the state could collect from sports betting. That cap had limited collections even as actual revenue exceeded expectations, with sportsbooks generating $29.9 million in 2023.
Supporters of the new law say removing the deductions will direct more money to state programs, including the Water Plan Implementation Cash Fund, which is expected to receive roughly $13 million in added funding during the 2026–27 fiscal year.