Sports Betting Taxes: Do I Have to Claim My Winnings?

With a growing number of states legalizing online sports betting, many taxpayers are dealing with taxes on their sports betting for the first time. . 

Whether you just placed a few bets on college basketball this spring or you’re a year-round sports betting fan,  you need to know about how taxes on your winnings work. Knowing how much you can expect to pay will ensure you’re financially prepared when filing your tax return.

If you’re new to sports betting, you probably have questions. How will I be taxed on sports betting? What forms do I have to file? Get answers to these questions and more in our guide.

Are winnings from sports betting taxed?

Generally speaking, winnings from sports betting are taxed just like any other income. According to the IRS, your sportsbook winnings are considered ordinary taxable income. If you bet on sports and win money, you’re expected to report that on your tax return.

While sportsbook winnings are taxable, your tax bracket will determine the amount of tax due. Your tax bracket is based on your total taxable income, which includes any income you earn as an employee or contractor, as well as your sports betting winnings.

Even if you don’t earn a net profit from sports gambling, you’re still expected to report your winnings to the IRS. If you use a sportsbook frequently throughout the year and receive a copy of Form W-2G from your sportsbook, you need to report that on your tax return.

What counts as sports betting for tax purposes?

When you hear the term “sports betting,” online sportsbooks are probably the first thing that comes to mind. For example, some popular online sportsbooks include DraftKings, FanDuel, or BetMGM. 

Several states haven’t legalized online sports betting, but they still have in-person sportsbooks. If you visit a casino to bet on a sporting event, any money you win is subject to taxes.

Sports betting can also include winnings from participating in fantasy sports leagues. Even if you’re playing in a small fantasy football league with your friends, you should report any winnings from your fantasy sports leagues.

Keep in mind that your friends or fantasy sports league commissioner aren’t responsible for sending you a 1099 form or W-2G. Even though you won’t typically receive these forms from your fantasy sports league, you’re still responsible for reporting your income.

How do sports betting taxes work?

While sports betting taxes may seem confusing at first, they’re fairly straightforward. All winnings from bets placed on games or events,whether you’re betting on college basketball  or playing daily fantasy contests, are taxed as ordinary income by the IRS.

Since your sportsbook winnings are taxed as regular income, they’re taxed at the same rate as the rest of your income. If you had $50,000 in taxable income and won $5,000 from sports betting, your total taxable income is $55,000.

It’s important to keep in mind that your marginal income tax rate can increase if your sports betting winnings push you into a higher tax bracket, especially if you’re already close to the income threshold.

The gambling institution you use, whether that’s an online sportsbook or fantasy sports provider, should send you a copy of Form W-2G detailing your winnings. You can use this form to report your sportsbook winnings on your tax return.

In some cases, the gambling institution you use will send you multiple W-2Gs. Form W-2G is issued for any sports bet where you win at least $600, and the payout is at least 300 times your wager.

Even if you don’t receive a copy of your W-2G, you still need to report any winnings from sports betting. If you use a sportsbook app or website, you can look at your account details to see your stats for the year.

If you win more than $5,000 betting on sports, your sportsbook may be required to withhold a percentage of your winnings for federal taxes.

Sportsbooks will withhold 24% of winnings if you provided your Social Security number as regular withholding, or 24% as backup withholding if you didn’t provide your Social Security number.

Reporting sports betting winnings

Paying taxes on sports betting starts with understanding how to report your winnings. Whether you’re playing daily fantasy sports, “DFS”, or college basketball betting through your favorite online sportsbook, you have the same obligation to report your winnings.

Sports betting winnings should be totaled and reported on line 8b of Schedule 1 (Form 1040). This amount becomes a part of the total of your additional income, which is reported on line 8 of your 1040. Your additional income is added with all other sources of income in computing your total taxable income and your total tax liability for the year.

If you file a paper tax return and have several W-2Gs with no tax withholding, you don’t have to worry about attaching copies of your W-2Gs when you file your tax return.

However, you should keep copies of any W-2Gs you receive in case the IRS needs to verify any claims. If any of your W-2Gs did have tax withheld, attach those W-2Gs to your tax return, and also keep a copy with your records.

Reminder: even if you don’t receive a W-2G at any point during the year, you still need to report your sports betting winnings. Make sure you keep detailed records of your winnings to support your tax return.

Deducting sports betting losses 

For many sports bettors, the losses are nearly as frequent as the wins. You might be wondering if you must pay taxes on all your sports betting income, even if you end up losing money at the end of the year.

The good news is that you may be able to write-off your sports betting losses. Let’s say you win $4,500 and lose $5,000; your net result is a loss of $500. If you itemize your deductions, you will not owe any tax on the $4,500 of winnings, because your losses are more than your winnings.

One thing to keep in mind is that you can only write off your sports betting losses if you itemize your deductions. You can deduct your gambling losses on line 16 of Schedule A (Form 1040), but you’re not eligible to deduct those losses if you claim the standard deduction.

You also can not deduct more losses than winnings.

Meticulous record-keeping is a crucial part of preparing for filing your tax return as a sports bettor. Keep records of all your wins and losses and ensure the supporting documents are well organized. At the end of the year, you’ll have detailed records you can refer to that will help you prepare your tax return.

While many online sportsbooks and daily fantasy sports providers keep a record of your stats, it’s not as easy to see your wins and losses at casinos and retail sportsbooks. Even if you think you may receive a W-2G, you should maintain detailed records for your files.

Navigating state regulations on sports betting

Most of what we’ve discussed applies to federal taxes on sports betting, but many states also have a tax on sports betting winnings. When you file your state tax return, it’s important to make sure you report your sportsbook and fantasy sports winnings if it’s required by state law.

State regulations for taxes on sports betting vary widely from state to state. Some states don’t tax sports betting at all while betting in some states means you have to pay federal and state taxes. If you’re going to bet on sports, spend some time researching your state tax laws on sports betting.

Reviewing a tax document checklist can help you make sure you’re reporting all your income and filing the right forms when tax season arrives. As a sports bettor, it’s especially important to make sure you have copies of your W-2Gs and detailed records of your wins and losses.

If you’re confused about your state’s laws on sports betting taxes or how to report your winnings and losses, a tax expert can help. Before consulting a tax expert, make sure you have copies of any W-2Gs you received and detailed records of your sports winnings and losses.