Taxes on Sports Betting and How to Pay Them

Taxes on sports betting are real and they are definitely something you need to take into consideration when deciding to bet on sports. You definitely don’t want to wake up one day to financial problems for simply not paying a tax, right?

We’re here to give you all the information you need on this topic and help you make sure you never miss a tax.

So, with this being said, here’s everything you need to know regarding paying taxes on sports betting!

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Can I write off my losses?

You can’t write off more than what you win. If you are betting for a living, you will need to itemize your deductions.

If you win $1,000 at DraftKings but lose $1,500 at FanDuel in 2021, you can write off $500 in losses.

The IRS considers you a professional gambler if gambling is your primary source of income. This has tax benefits that are different from casual bettors.

Most people will fall into casual bettor mode, and this is something known worldwide.

Professional gamblers report their winnings under Schedule C within 1040. Professionals may also list their winnings there and deduct any associated expenses (travel costs, wagers lost, etc.)

Taxes on Sports Betting: Everyone must report their winnings

taxes on sports betting: report winnings

Even if you do not fall within the casual bettor classification, you must still report your winnings to your taxable income.

If you win $10 on a bet made between you and your friends in your living room… they probably won’t know. However, that doesn’t mean you are exempt from the law.

Sportsbooks and casinos will issue a 1099 to you if you win more than $600 in a single year. You should send a copy to the IRS, so they know what you owe.

Bettors can report their winnings and any federal income taxes withheld from them.

Reporting taxes withheld

Many sportsbooks and casinos begin to withhold federal taxes on winnings above $5,000.

It’s like your weekly paycheck. You must report any tax withheld from your winnings on the W2G or 1099. Contact your casino or sportsbook if you have not received one.

Taxes On Sports Betting: From one state to the next

taxes on sports betting in each state

The IRS will notify the states that you have reported your winnings from sports betting to it. They may also want to tax it.

If your state has an income tax, they will expect you to include your winnings in your state’s income returns.

You must declare winnings you have made in another state if you win money. You can claim an exemption from your home state tax return to avoid paying double taxes on winnings.

Your income may be subject to a higher tax in your home state than the one you wager in. The home state will generally require you to pay the difference. You may be eligible for a deduction if the tax rates in your home state are lower than those in the other.

Taxes on Sports Betting: Our Thoughts

Keep in mind that this is only our advice. It is probably a good idea for you to hire someone to handle your taxes if you regularly bet across multiple states, just to make sure that you’re doing everything right.

With this being said, taxes on sports betting are a thing and you must make sure that you pay them and stay in the legal zone.

Remember, always bet with your head and not over it!

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