• All sports betting wins are considered taxable income and should be claimed on sports bettors’ taxes.
  • The Internal Revenue Service (IRS) requires taxes to be filed if players earn $600 or more.
  • Sports betting fans are able to deduct losses, but only to the amount of their winnings.

WASHINGTON – Sports betting fans across the country are enjoying legal sports betting within their states for the first time, and understanding the tax implications associated with legal sports betting is important.

The Internal Revenue Service, or IRS, requires sports betting winnings to be claimed on taxes every year. Taxpayers can also offset their winnings with their losses, but can only claim losses up to the amount of their total winnings from legal sports betting.

Sports Betting And Taxes

The first thing sports betting fans need to note is that all sports betting revenue is considered taxable income and should be filed on their taxes should they exceed $600 in wins.

“Gambling winnings are fully taxable and you must report the income on your tax return,” reads the IRS Topic No. 419 Gambling Income and Losses. “Gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races, and casinos.”

This applies to professional gamblers betting on sports as well as casual sports betting fans. Even if you only bet on sports sometimes, you are required to claim your winnings from legal sports betting to the IRS.

Sportsbooks provide betting fans with a W-2 G form which will be used by the taxpayer. When filing their taxes, this is the form that will allow players to answer the question as to how many wins or losses they have accumulated.

As far as deducting losses, the gambling-loss deduction of the federal code allows players to completely offset their winnings with their losses. Players cannot claim more losses than winnings, however.

This means if a player won $1,000 betting on sports during the course of a year, but lost $1,500 in the same year, they can only claim a maximum of $1,000 as losses on their tax form. With this, their winnings will be null and void and players will not owe anything on their sports betting winnings to the IRS.

It is also important to note, that reporting your sports betting winnings even if the amount won is less than $600 is still required by the IRS.

“You must report all gambling winnings as Other Income,” reads the IRS “other income” section of the 1040 form.

The Sports Betting Boom And Taxes

The American Gaming Association estimates that more than 47 million sports betting fans placed action on the March Madness tournament this year, which will be a major boost in revenue compared to the previous year where no March Madness betting occurred due to COVID-19.

Sports betting fans who first started taking action on Super Bowl LV betting or betting on the 2021 March Madness Tournament won’t have to worry about filing these winnings on their taxes this year, however. Taxes account for income during the previous year, therefore this is something that needs to be filed in 2022.

Even so, many legal sports betting markets launched in 2020, and a lot of first-time sports betting fans began placing action for the first time during the year.

Colorado, Michigan, and Illinois are all states with legal sports betting that launched their markets in 2020. In fact, 2020 saw the most growth in terms of legal sports betting since the repeal of PASPA in 2018.

The federal government is sure to be ready for the influx in revenue from taxes this year, as the nation itself moves to recover from the COVID-19 pandemic.

“One thing that taxpayers may be surprised to learn is that in many cases they will not be able to net out their losses,” said Bill Ordine, a gambling expert, analyst, and writer.

States, in general, reported huge revenue numbers throughout the year, with multiple states seeing hundreds of millions every month being wagered on sports.

With sports betting becoming more ingrained in the sports world, the IRS will continue to be more vigilant around tax time, meaning it will become harder for players to avoid claiming their sports betting winnings on their taxes.

Where in the past, some taxpayers would omit that information, sports betting revenue will become easier for the federal government to track, meaning the safest option to avoid huge back pay and fines from the IRS would be to properly claim sports betting winnings.

Sports betting will continue to boom as more states pass regulations and launch local markets. One thing that won’t change, however, is that one must always pay ones taxes.

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