The information in this article is up to date for tax year 2023 (returns filed in 2024).
Are you betting on the Superbowl this year? If so, you’re not alone.
Sports betting is now legal in 38 states plus Washington D.C. And with the rise of legal sports betting sweeping the nation, more and more people are getting in on the action. In fact, an NFL survey found that 19% of American adults plan to place a bet online, at a casino or with a bookie this year, up 56% from a year ago.
So how does sports betting affect your taxes?
Well, like most income, if you win, you’ll have to pay some of those earnings back to Uncle Sam.
Read on to learn the basics of sports gambling taxes and how to report your wins and losses to the IRS.
Do you have to pay taxes on gambling winnings?
Yes. Just like income from your wages or investments, earnings from sports gambling are considered taxable income. The good news is that gambling losses can be deducted from your gambling income (though you cannot deduct more than you won), reducing your tax liability.
You’ll be expected to pay federal income tax on any gambling winnings. Additionally, you will likely have to pay state taxes on your earnings as well. However, state tax liability will vary widely depending on the state you live in and gambled in.
How to report your gambling winnings on your taxes
The payer should provide you with a Form W-2G reporting your winnings and the amount of tax withheld if you won $600 or more and the amount is at least 300 times the wager. You will use this form to report to the IRS State taxes will vary by state but if you receive a Form W-2G, your federal tax withheld will be 24%.
Keep in mind the 24% tax withholding is an estimated tax. When you go to file taxes, you will need to calculate the final tax owed based on your total income for the year, including losses and deductions and any winnings not reported on a Form W-2G.
Report your income and taxes already paid in “Other Income” on Form 1040. Use Schedule A to itemize any deductions. Keep in mind that if you choose to claim the standard deduction, you cannot deduct your losses on your tax return.
For 2023 tax returns (filed in 2024), the standard deduction is $13,850 for single filers, $27,700 for those married filing jointly, and $20,800 for heads of household. If your gambling losses do not exceed the standard deduction for your filing status, it probably isn’t worth itemizing.
Keep a detailed record of your gambling income and losses
You can only deduct your gambling losses up to the amount of winnings you report. However, while sportsbooks will report your gambling wins, they likely won’t report your losses.
So, to ensure you get the full deductions you’re eligible for, keep a detailed record of your wins and losses along with documentation verifying your gambling activities, including receipts, tickets, statements. This will help you accurately itemize your deductions and provide a clear paper trail for the IRS if you are ever audited.
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The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.
