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If you’re new to sports betting, you may have questions about how this may affect your taxes. In fact, you may be wondering if you pay taxes on sports betting at all. Like most financial activity in life, you can expect taxes to be a part of it. Whether or not you need to pay taxes will depend on your situation. We’ll answer your top sports betting questions about tax in this post.
But first, one important tip for all sports bettors is to keep records! Make sure you’ve got records for each wagering transaction, including the date, wager amount, and any wins and/or losses. Depending upon where you do your gambling, they may provide you with an account statement but better to be safe and maintain your own records.
How much are taxes on sports betting?
Your sports betting winnings are considered taxable income—specifically they are deemed ordinary income on your return. If you’ve won money placing bets, the tax rate can be anywhere from 10% to 37% based on your income tax bracket.
If you’ve lost money, you won’t owe any taxes, but you may be able to deduct your losses if you itemize your deductions on your return. Take note: You can’t deduct more than your winnings.
What forms do I use to report sports betting activity?
Typically, the betting organization or platform will send you and the IRS Form W-2G when you win $600 or more. If you have winnings of $5,000 or more, the business may withhold up to 24% of the proceeds for federal income tax. If this is the case, it will be shown on Box 4 of your W-2G.
To complete your tax return, you’ll report your winnings as “gambling income” on Form 1040, Schedule 1. If you have losses, you’ll report them on Schedule A.
Can I lump all bets in a given time period into a “same session winnings” or do I need to claim every single bet and itemize the losses?
Lumping all of your bets together (called netting transactions) is unfortunately not permitted. You need to report each wagering transaction separately. You can’t reduce your gambling winnings by your gambling losses and report the difference.
Assuming you’re not a professional gambler, you must report the full amount of your winnings as income and claim your losses (only up to the amount of winnings) on your tax return separately.
As mentioned above, you can only claim the losses as an itemized deduction. If you claim the standard deduction instead of itemized deductions, you’re not permitted to deduct your losses at all.
For additional help, check out our post on gambling winnings tax.
Get help reporting your sports betting taxes
While specialized areas of taxes can be confusing, you don’t have to go it alone. Trust the expertise of H&R Block to help you file your taxes.
Make an appointment to file with a tax pro or file taxes online with H&R Block Online today!
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