When it comes to online betting for Americans, it’s “game on!” Since the Supreme Court lifted the federal ban on sports betting in 2018, we’ve seen a large increase in the number of people who have placed a bet on a sporting event. As of early 2024, sports betting is now legal in 38 states plus Washington, D.C., and an estimated 23 million individuals placed an online sports bet in 2023.
So if you made any bets on the big game, you may wonder how your online gambling affects your tax returns. The simple answer is that you are required to report all of your gambling winnings – no matter how big or small they may be.
What Does the IRS Say?
According to the Internal Revenue Service, gambling wins are considered taxable income. Depending on how you file your taxes, you’ll be required to report your winnings on Form 1040 or Form 1040-SR as a part of your “other income.” Typically, when you win at least $600 and the payout is at least 300 times the amount of your wager, you’ll receive Form W-2G from the casino, lottery or other payer.
Can You Report Gambling Losses on Your Taxes?
Generally, the answer to this is yes. But it does come with a few caveats. If you itemize your deductions on Schedule A of Form 1040 and you kept a record of your winnings and losses, you can deduct your gambling losses. It is important to know that you cannot deduct more than the amount of gambling income you reported on your return.
Do I Have to Withhold Money for Taxes?
This depends on the amount of money you win. If you win more than $5,000 on a wager, and the payout is at least 300 times the amount of your bet, you’ll be required to withhold 24% for income taxes. You also may be required to pay state or local taxes on the money you win.
Other Important Considerations
If you’re betting through a sportsbook or casino, they are required to keep records of your winnings and losses and will report this information to the IRS at the end of each year. Additionally, if you’re a professional gambler, you may be required to file a Schedule C form – this is how self-employed individuals report their income to the IRS. Professional gamblers may also report losses, but they must be reported as a business expense.
How ARAG Can Help
If you are enrolled in a legal plan through ARAG, you may be able to work with a network attorney who can help you address and resolve state and local tax collection, state and local tax audits, federal IRS tax collection and federal IRS tax audits. In addition, you may have access to additional tax services from experienced tax specialists.
