Last updated on: December 29th, 2022
Sports Betting And Taxes – Paying Taxes On Your Sports Betting Winnings
Since legal sports betting is a relatively new industry, many are confused about the tax laws and regulations surrounding the industry. The most important thing to note is that sports betting winnings of any size are required to be claimed on income tax filings.
Claiming Your Winnings On Sports Betting
According to the IRS, it is required by law to claim your gambling winnings on your taxes. All income is taxable, this includes gambling winnings from international sports betting sites as well. You must claim any cash winnings, prizes, winnings from lotteries, raffles, as well as any casino winnings you earned throughout the year. The IRS is not concerned with where you got your winnings from, whether that be state-sanctioned gambling or offshore gambling sites, the government simply wants you to claim it. This is vital to avoid paying back-taxes in the future.
The percentage that the government takes from your sports betting winnings are dependent on a slew of circumstances. There is no set percentage that is taken from your sports betting winnings so you will not know how much you owe the government until after you file your taxes.
Filling Out Tax Form 1040 For Sports Betting
Because the establishment you won your winnings from may have sent a Form W-2G to the IRS on your behalf, it is important to be responsible and claim your sports betting winnings. When this form is submitted, they explain how much you won, on what kind of wager, and how much (if any) tax they withheld (which is usually 0). This situation only happens in a few situations such as large wins but it is still best to have your own information on hand.
On Tax Form 1040, you will total your winnings from sports betting on line 21. This line is listed as “other income” and simply write in your total money won. If you live in a state with state income tax, the process will slightly differ but be of similar circumstances on your state income tax filing. States such as Alaska, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming are all exempt from state income tax.
What About My Gambling Losses?
Even if you made money overall for the year, you should still claim your losses as well. This goes on your Schedule A form under line 28 titled “other miscellaneous deductions.” You only pay taxes on your net winnings, so proving that you lost a decent amount will greatly negate a majority of the taxes if this is the case. Keep in mind you must be able to provide a detailed record of your winnings and losses but this information can help in the long run.
If you are claiming a yearly loss, your deductions cannot exceed your reported winnings. Stated in an example, if you won a $500 bet but lost $2,500 on the year, you can only claim $500 in losing wagers. In short, you cannot claim a loss for more than you won in gambling. Similarly, if you won nothing and lost $250, nothing can be deducted from your gambling efforts.
Penalties For Not Abiding By Sports Betting Tax Laws
Penalties for not abiding by sports betting tax laws are relatively severe. Any sports betting earnings that go beyond $600 are expected by the IRS to be reported by the gambler when they file their taxes. Any unpaid taxes will accrue interest; if a bettor cannot pay the taxes owed on time, the IRS will garnish the bettor’s wages. There is also a potential $100,000 fine and up to five years in prison for anyone found guilty of tax evasion. The IRS is also notoriously thorough, so it is not a risk worth taking to try to avoid paying sports betting income taxes.
Can I Keep My Winnings In An Offshore Account To Avoid Paying Taxes?
This is a bit of a legal gray area, and will vary depending on your sportsbook and state. However, it is best practice to simply declare your winnings.
Do Casinos Have To Report A Customer’s Winnings?
Casinos can withhold the taxes on your winnings if they so choose. If a bettor has won more than $5,000, it is common practice for the establishment to take out the necessary taxes. After that point, they will also send their customers a W-2G form to fill out during tax season.
Bovada has been considered the top online sportsbook in the industry for over a decade. Being that they’ve been around for that long, they are also one of the most trusted. Bovada thrives off of offering incredible features such as great bonuses for new users, an easy to use platform from both a computer and your phone, and just great odds all around on a wide range of sports. You can find odds on several different sports and hundreds of different sporting leagues.
- Thousands of Super Bowl bets
- Exclusive player props
- Easy-to-use interface
- Mobile friendly
- Efficient payouts
At BetOnline, they reward all of their new users with not just one, but two $1,000 bonuses that you can choose from depending on your preferred financial method. The first is a 50% first deposit match where they’ll match your initial deposit by up to $1,000 with any accepted deposit method except for cryptocurrency. Crypto users though can enjoy a 100% match on their first deposit up to $1,000 as well.
- Reliable Banking Methods
- Strong Server Connection
- 10+ Year Track Record
- Huge Assortment Of Odds
- No App Mobile Betting
Safety definitely comes first on MyBookie as they have some of the top security measures in place. They use Bit-256 ad SSL to secure their servers holding your payment information and your web browser as well as your web browser that holds all of your personal information. Adding on to your safety measures, they run a 24/7 customer service that’ll help you in the rare event that something were to go wrong with your account and walk you through any steps needed until the issue is resolved.
- Huge Player Bonuses
- Consistent Odds
- Easy Interface
- Rapid Live Betting
- Legal In The US
With cryptocurrency rising as one of the most popular forms of payment in the world, SportsBetting made sure to adapt to that by letting you deposit and withdraw into your accounts with 17 different forms of crypto. Ranging from big named coins in Bitcoin and Ethereum to smaller altcoins in Dogecoin and Apecoin. The beneficial part to this as well is that there are no transaction fees associated with them and fast processing times.
- Efficient Site Layout
- Full Mobile Betting Suite
- Available Customer Service
- Trustworthy Banking Options
- Fast Payout Times
All smartphones and smart devices in today’s day all have access to the internet in which you can access XBet’s incredible mobile betting platform. Anything that you’d be able to access from your computer in terms of features that they offer can all be found on their mobile platforms. You can log in , make deposits and withdrawals, use bonuses, and much more. They are available on several different platforms as well including iPhone, Android, and Samsung Galaxy.
- Worry-free Legal Betting
- Exclusive Bonus Offers
- Constantly Updated Odds
- Premier User Experience
- Full Mobile + Live Betting
Reporting Offshore Sportsbook Earnings
Even if you’ve won all of your money gambling with offshore sportsbooks, the IRS wants to know about it so that you get taxed accordingly. Failure to report these funds on your tax returns could lead to future audits or inevitable payments that you thought you were free from. However, not every sports bettor needs to claim their winnings on their taxes. If you’ve won less than $600, you’re in the clear as far as reporting them is concerned. You can choose to report them if you wish but you also will not be in any trouble for not reporting them.
Tips For Reporting Sports Betting On Tax Returns
If the yearly earnings from one platform is a sizable amount, the operator will send the gambler Form W3-G, the form for “Certain Gambling Winnings”. Using this form is completely fine if the bettor has received one. However, if they did not, their earnings should still be reported on Form 1099. From Daily Fantasy Sports (DFS), Leagues and Contests, or general sporting event wagers, anything that surpasses the $600 mark needs to be reported by the taxpayer.