Do I owe Colorado state tax on sports betting and gambling winnings?
By the W2gMatch team · Sources checked 09-06-2026 · General information, not tax advice.
Yes. Colorado taxes gambling winnings as ordinary income at its flat rate, 4.4% by statute, which TABOR can temporarily lower for a given year. Since January 2026 any payer in Colorado must withhold 4% state tax from winnings that are subject to federal withholding. Colorado starts from federal taxable income, so the federal treatment of losses, including the 90% limit, carries into the state return.
How Colorado taxes the winnings
“Colorado income tax is based generally on federal taxable income,” and applies to every resident and to the Colorado-source income of nonresidents. [1] The rate is flat; the Department's table shows 4.4% for 2022, 2023 and 2025 and 4.25% for 2024, when a TABOR surplus lowered it for the year. [1] The statutory rate is 4.4%, and a temporary reduction was again reported for tax year 2025 returns. [2] The Department's table is the authority for each year.
Losses on the Colorado return
Because Colorado begins with federal taxable income, the federal itemized deduction for gambling losses, including the 90% limit that applies from tax year 2026, carries into the Colorado computation. A taxpayer who takes the federal standard deduction has no gambling loss deduction on either return.
What is withheld at the window
“Any payer making any payment of winnings within Colorado must deduct and withhold from such winnings Colorado income tax at a rate of 4%” when the winnings are subject to federal withholding reported on Form W-2G or 1042-S and are not exempt from Colorado tax. [3] The rule, Regulation 39-22-604-2, took effect January 9, 2026. [4] Payers register with the Department, report the Colorado winnings and withholding on the W-2G, and file it with the state. [3] Federal withholding applies when a payout minus the wager exceeds $5,000 and, for sports bets, is at least 300 times the wager, [5] so the state withholding follows the same large-payout trigger; everything below it is due with the return.
Residents, part-year residents and visitors
Colorado residents are taxed on all their gambling winnings wherever the bet was placed, with a credit for tax paid to another state where one applies. Nonresidents are taxed on income from Colorado sources, which includes winnings from bets placed and casinos played in Colorado, and file the nonresident schedule. [1]
What is legal in Colorado, and who sends the forms
Every online sportsbook licensed in Colorado issues Form W-2G on the federal per-wager rules and applies the state withholding to payouts above the federal trigger. Annual win/loss statements come from each operator separately.
The federal return underneath
Federal: for tax years beginning in 2026, only 90% of gambling losses are deductible (the 90% gambling loss cap).
Every state page sits on the same federal rules: all winnings are reported on Schedule 1 whether or not a form arrives, and losses are an itemized deduction capped at winnings and, from 2026, at 90% of losses under amended section 165(d). The federal loss page and the by-state table show how Colorado compares.
Related questions
Was Colorado tax withheld from my sportsbook win?
Only if the payout was large enough for federal withholding, more than $5,000 above the wager and 300 times the wager, and only for payments from January 9, 2026. The W-2G shows any state withholding.
I live in another state and bet while visiting Colorado. Do I file in Colorado?
Winnings from bets placed in Colorado are Colorado-source income. Nonresidents with Colorado-source income generally file a Colorado nonresident return and may take a credit on their home-state return.
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Sources
- Colorado Department of Revenue, Individual Income Tax Guide, read September 6, 2026
- MBE CPAs, How Colorado TABOR refunds changed in 2026 (temporary 4.25% rate for tax year 2025), 2026 (secondary source)
- Colorado Department of Revenue, Withholding Tax Topics: Gambling Winnings, revised March 2026
- Bloomberg Tax, Colorado DOR adopts rules on income tax withholding for gambling winnings (Reg. 39-22-604-2), January 23, 2026 (secondary source)
- IRS Instructions for Forms W-2G and 5754, Rev. January 2026
Related
This page is general information about how U.S. federal and state tax rules apply to gambling, written to be checked against the sources it cites. It is not tax advice for your situation. A licensed CPA or enrolled agent should review your return before it is filed.