Paying Taxes On Sports Betting Winnings
All forms of gambling are considered taxable income, and sports betting is no different. With over half of the states in the country having launched their own regulated sports betting market, the IRS will be owed a share of your potential profits. So if you've gotten in on the wave of sports betting already, or are considering getting into it soon, it'd be smart to make sure you're up-to-date and informed on the relevant tax information involved. Paying taxes on sports betting winnings isn't fun or glamorous, but it could keep you out of trouble and keeping your profits.
Is Sports Betting Winnings Considered Income?
Yes, your sports betting winnings are considered taxable income and should be reported as such. You should also include your wager amount as well. So, if you wager $1,000, and win another $1,000, you would claim $2,000 in income on your taxes. Itemizing deductions would allow you to deduct the wager as an upfront cost. As for your losses, you can deduct those as well but only up to the equivalent amount of your winnings; therefore, your deductions cannot be more than your reported income.
How Much Do I Have To Pay In Sports Betting Taxes?
So as with any earnings/winnings, you will be expected to pay federal tax on your sports betting winnings. The amount you'll have to pay however, is dependent on how much you win throughout the year. As long as you make less than $10,000 (specifically $9,950) there's no flat tax, and the percentage is only 10%. From there, it goes up.
|Tax Bracket:||Flat Tax:||Tax Percentage:|
|$9,951-$40,525||$955||12% of everything over $9,950|
|$40,526-$86,374||$4,664||22% of everything over $40,525|
|$86,376-$164,925:||$14,751||24% of everything over $86,375|
|$164,926-$209,425:||$33,603||32% of everything over $164,925|
|$209,426-$523,600:||$47,843||35% of everything over $209,425|
|$523,601+||$157,804.25||37% of everything over $523,600|
Sports Betting, Gambling Income Tax By State
The tax rate for gambling is up to each state's lawmakers to decide, and therefore often varies heavily from state to state. Here's a breakdown of each state's gambling income tax, not including any federal tax rates
- Alabama: Up to 5%
- Alaska: 0%
- Arizona: 2.59% to 4.50%
- Arkansas: 2% unless losses are itemized and deducted
- California: NA
- Colorado: 4.63%
- Connecticut: 6.99%
- Delaware: 0-6.6%
- Florida: 0%
- Georgia: 6%
- Hawaii: 4% for professional gamblers
- Idaho: 6.925%
- Illinois: 4.95%
- Indiana: 3.23%
- Iowa: Varies
- Kansas: 5% state levy on 5k+
- Kentucky: 6% state take on 5k+
- Louisiana: 3-5% based on earnings
- Maine: 5%
- Maryland: 8.75%
- Massachusetts: 25-495 based on category
- Michigan: 4.25%
- Minnesota: Varies based on overall income
- Mississippi: 3-5% based on earnings
- Missouri: 4-5% based on earnings
- Montana: 6.9% on 5k+
- Nebraska: Varies
- Nevada: 25% for residents, 30% for foreign gamblers
- New Hampshire: 0%
- New Jersey: 5-8% based on earnings
- New Mexico: 6%
- New York: 30%
- North Carolina: 5.2%
- North Dakota: 5.75% on 5k+
- Ohio: 4%
- Oklahoma: Varies
- Oregon: 8%
- Pennsylvania: 3.07% or 15.3% for professional gamblers
- Rhode Island: 51%
- South Carolina: 7%
- South Dakota: 0%
- Tennessee: 0%
- Texas: 24%
- Utah: 5%
- Vermont: 6-6.72% based on earnings
- Virginia: 2-5.75%
- Washington: 0%
- West Virginia: 6.5%
- Wisconsin: Varies
- Wyoming: 0%
Do I Have To Report Winnings Under $600?
Put simply, any and all earnings are expected to be reported. If the IRS decides to audit your accounts, they will expect you to have reported any money you earned. The commonly cited $600 limit comes from the Form 1099-MISC IRS requirement on what's necessary to file. Whether you earned $60 or $6,000, it's a good idea to keep a record of it. Unless the income was considered a gift, it should be reported.
What Happens If I Don't Report My Winnings To The IRS?
As with any earnings the IRS expects their cut, and failure to pay out could result in some penalties. Not paying owed income tax typically results in a fine of 0.5% of the owed unpaid taxes. This fine is evaluated every month, and the unpaid tax/penalties often accrue a 5% compounded interest from the due date until the balance is paid.
The punishment for hiding or omitting income however is often more severe and is considered a felony. Doing so could potentially rack up thousands of dollars in fines and even several years of prison time. Not to mention that if you're convicted of tax evasion, you could also have to pay for the cost of your own prosecution.
Is Sports Betting Taxed By Both Federal And State Governments?
Wagering of any kind, including sports wagering, is subject to federal excise taxes. Even in states that haven't legalized or launched a regulated sports betting market, where residents take advantage of offshore online sportsbooks like Bovada, earnings from sports betting are subject to federal excise taxes. In states that authorize sports betting, the rate is 0.25% of the amount wagered with a $50 annual occupational tax for the agent or principal accepting wagers. For states that have not yet authorized US sports betting, the tax rate is 2%, with a $500 annual occupational tax.
Do I Have To Claim Fantasy Football Winnings?
In short, yes you are expected to report these the same way that you would any other earnings or winnings. If you win $600 or more in profit, the company you played with actually has a legal obligation to send out a Form 1099-MISC to you and the IRS. Although for amounts under $600 they won't send you a form, but it's still heavily advised that you claim all earnings from your Fantasy Football winnings. If a form is not received, you are still expected to report net profits on both your federal and state income tax returns.
How To Itemize And Deduct Sports Betting Losses
Tracking and itemizing all of your sports betting losses can be advantageous, especially since doing so allows you to deduct them. According to IRS Topic No. 419, in order to deduct your gambling losses, you will need an accurate diary or record of all of your gambling winnings and losses. This log will be expected to contain receipts, tickets, statements, or some demonstrative evidence of your winnings, and your losses. A physical logbook is easier for some, but online record-keeping spreadsheet software can work better for others.
Tracking Gambling Winnings And Losses
Keeping up with what you bet on, how much you wagered, and how much money was won/lost is an overall good idea even outside of potential tax reasons. Keeping a log such as a diary or journal that keeps up with your wagers is always a good idea. Many offshore online sportsbooks actually keep a log of your bet history for a while as well for you to reference. Being able to easily look back on these logs can be extremely helpful when you're doing your taxes, but even if you're utilizing an offshore online sports betting website, we still recommend logging the basic details of your bets in your phone, or a journal of some kind.
Consult A Tax Attorney Or Professional
It's important to note that we are not legal professionals, the information provided here is simply to familiarize you with the tax laws regarding sports betting. If you plan to start betting on sports and bringing in some winnings, we suggest you consider consulting with a professional about handling the tax side of things. Otherwise, if you're trying to gain a basic understanding of what to expect going into the sports betting world, this page should have all the information you need to get started.