A Beginner’s Guide to Sports Betting Tax in the US
Whether you’ve won big or small, knowing the rules around online sports betting tax is an important part of gambling. Our handy guide will break down what you need to know about how much you’ll have to pay, when and how to pay it, and a few tips to ensure you don’t pay more than you owe. Read on to get started.
Tax on Sports Betting Winnings
Off the bat, bettors should know that gambling wins are fully taxable — whether it’s sports betting, casino games, lotteries, scratchcards, or any other form of gambling. You’ll need to declare your sports betting winnings on your annual tax return, specifically within ‘Other Income’ on Form 1040. The amount of tax you’ll have to pay is based on your overall taxable income.
Form W-2G
You may also need to complete Form W-2G, which is used to report gambling winnings and tax withholdings. In certain circumstances, sportsbooks and casinos are legally required to issue these forms and withhold 24% in federal taxes, and report these winnings to the IRS:
- Sports betting wins of at least $600 but less than $5,000 are taxable, but no tax is withheld by the bookmaker.
- Wins of $5,000 and greater are taxable immediately and taxes must be withheld by the bookmaker.
W-2G forms are based on your aggregate wins and losses over a 24-hour period, rather than an annual basis. Your bookmaker will usually mail your W-2Gs directly to you — for example, BetMGM mails all W-2Gs by January 31.
Deducting Losses
It’s not all bad news when it comes to the taxman — you’re able to deduct your losses to reduce the amount of sports betting tax you’re liable to pay.
Say you win a total of $5,000 over the course of the year. Without deducting your losses, you would have to pay roughly $1,200 in tax on these winnings. However, say you lost $3,000 in that same period. You can deduct those losses from your winnings, meaning you’re only liable to pay tax on $2,000 — a much smaller amount of $480.
Keep in mind you can only deduct losses up to your total winnings. If you won $5,000 but lost $10,000, you may only deduct $5,000 from your total income. Of course, that still means you won’t have to pay any taxes on your sports betting winnings.
State Tax on Sports Betting
Most states have a tax on income earned within their jurisdiction, and that includes winnings on sports betting. Each state that has legalized sports betting has its own set of rules and tax rates, so you’ll need to check what these are for your locale.
If you’ve paid tax on sports betting winnings while across state lines, you’ll still have to report the winnings to your resident state, but you’ll usually receive a deduction or credit for taxes paid to a non-resident state.
Sports Betting Tax for Non-Residents
Non-residents of the US must also report gambling winnings to the IRS, which are generally taxed at 30%. Winnings must be reported using Form 1040NR.
Keeping Records
To be sure you’re paying the right amount of tax on sports betting winnings, keeping accurate and detailed records is imperative. You should create a dedicated gambling log — either a physical notebook or digital document — to make note of your betting activity.
Record each bet and the date you made it, including the amount staked and the outcome (win or loss). Write down the event and the specific bet you made as well. It’s also a good idea to keep track of your starting and ending bankroll for each gambling session, including details of any deposits or withdrawals. You can usually find a full breakdown of your betting history within your sportsbook account.
Your chosen sportsbook should allow you to request an End of Year statement. This summarizes all monetary activity of your betting account, from deposits and withdrawals to total wagering amounts and more. Keep in mind it’s not a legal document, but it can help you prepare your taxes.
Paying Your Taxes
Explain how to pay sports betting tax covering the following:
- When do you have to pay?
- Paying federal and state taxes
- Penalties if you don't report your winnings
Any sports betting tax owed must be reported and paid by the tax return deadline each year. This usually falls on April 15 or a few days after. The next Tax Day is April 15 2024, which falls on a Monday.
It’s important to pay your tax correctly and on time. The IRS and your state tax authority can impose penalties and interest on unpaid taxes, which can add up quickly, turning a small tax liability into a substantial debt.
Keep in mind that sportsbooks must report daily wins over $600 to the IRS — failing to declare your winnings accurately could trigger an audit where your records will be scrutinized. In any case, we recommend seeking professional advice if you’re unsure about what tax you may owe on your sports betting returns.
Compare Sportsbooks with BettingOdds
So, that wraps things up for our guide to sports betting tax. While it may seem a little complicated, we hope we’ve helped you get to grips with the rules and requirements. If you need more assistance, be sure to get some help from a tax professional.
And if you’re looking to open a new sportsbook account, stick with us at BettingOdds. We’ve partnered with some of the best names in the business to help you find your perfect match — just head to our sportsbooks page to get started.
Frequently Asked Questions
Do I have to pay taxes on sports betting winnings?
Yes. Sports betting winnings are fully taxable, although losses can be used to offset winnings. You’ll need to pay roughly 24% in federal tax on your winnings, and any applicable state tax as well.
How do I report my sports betting winnings to the IRS?
Sports betting winnings must be reported to the IRS on your tax return, usually the ‘Other Income’ section of Form 1040. For larger wins over a certain threshold, the sportsbook may automatically deduct federal tax of 24% from your payout and report this to the IRS, and you’ll receive a copy of Form W-2G to document the tax paid.
Can I deduct my sports betting losses from my taxes?
Yes, but only up to the amount offset by your winnings. You must be able to prove this with accurate records of your wins and losses. For example, if you won $2,000 but lost $2,500, you can only deduct $2,000 worth of losses.
Are daily fantasy sports winnings taxable?
Yes, DFS winnings are treated the same as sports betting and are fully taxable.
How can I minimize taxes on sports betting winnings?
The best way to minimize sports betting taxes is to understand the rules and keep accurate records, including a breakdown of your wins and losses, as the latter can be used to offset your wins. You may want to consider consulting a tax professional as well.
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