Taxes on Sportsbook/Gambling Winnings

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skives19
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Taxes on Sportsbook/Gambling Winnings

Post by skives19 »

I live in Michigan and I know the income tax rate is 4.25%. Is it correct that the federal tax rate on sportsbook/gambling winnings is a flat 24%?

My second question is what are consider winnings? I’ve read a couple different things. Lets say I place a $50 bet and it pays out $100. Do I pay tax on the $100 or just the $50 I won?
BillWalters
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Re: Taxes on Sportsbook/Gambling Winnings

Post by BillWalters »

If you file as a professional gambler all winnings are income and losses are deductible. You have to file as self employed, which is not fun. Keep records, audits are not uncommon.
plog
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Re: Taxes on Sportsbook/Gambling Winnings

Post by plog »

1. No. "Gambling income" is just income, taxed just like any other income.

2. What you get paid. If you play a super favorite and bet $1000 to win $1100 you've won $1100.

They recently changed it so that the way you can offset your expenses (e.g. loses and initial bet) is by itemizing.

https://www.irs.gov/taxtopics/tc419#:~: ... nd%20trips.


However the most important thing to get from this is I am a random idiot on the internet. I believe I heard from my sister's ex-husbands cousin's dog walker that there are people who do other people's taxes as a vocation. But that's just 4th hand information and again, I'm a random idiot on the internet.
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skives19
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Re: Taxes on Sportsbook/Gambling Winnings

Post by skives19 »

plog wrote: Thu Apr 01, 2021 8:43 am 1. No. "Gambling income" is just income, taxed just like any other income.

2. What you get paid. If you play a super favorite and bet $1000 to win $1100 you've won $1100.

They recently changed it so that the way you can offset your expenses (e.g. loses and initial bet) is by itemizing.

https://www.irs.gov/taxtopics/tc419#:~: ... nd%20trips.


However the most important thing to get from this is I am a random idiot on the internet. I believe I heard from my sister's ex-husbands cousin's dog walker that there are people who do other people's taxes as a vocation. But that's just 4th hand information and again, I'm a random idiot on the internet.
So I’ll pay taxes again on the original money I bet with?
7eight9
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Re: Taxes on Sportsbook/Gambling Winnings

Post by 7eight9 »

skives19 wrote: Thu Apr 01, 2021 8:51 am
plog wrote: Thu Apr 01, 2021 8:43 am 1. No. "Gambling income" is just income, taxed just like any other income.

2. What you get paid. If you play a super favorite and bet $1000 to win $1100 you've won $1100.

They recently changed it so that the way you can offset your expenses (e.g. loses and initial bet) is by itemizing.

https://www.irs.gov/taxtopics/tc419#:~: ... nd%20trips.


However the most important thing to get from this is I am a random idiot on the internet. I believe I heard from my sister's ex-husbands cousin's dog walker that there are people who do other people's taxes as a vocation. But that's just 4th hand information and again, I'm a random idiot on the internet.
So I’ll pay taxes again on the original money I bet with?
You go to the book and bet a game at -110. You wager $110 to win $210 (your original $110 back plus $100). You don't pay taxes on the return of your $110.
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skives19
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Re: Taxes on Sportsbook/Gambling Winnings

Post by skives19 »

7eight9 wrote: Thu Apr 01, 2021 8:58 am
skives19 wrote: Thu Apr 01, 2021 8:51 am
plog wrote: Thu Apr 01, 2021 8:43 am 1. No. "Gambling income" is just income, taxed just like any other income.

2. What you get paid. If you play a super favorite and bet $1000 to win $1100 you've won $1100.

They recently changed it so that the way you can offset your expenses (e.g. loses and initial bet) is by itemizing.

https://www.irs.gov/taxtopics/tc419#:~: ... nd%20trips.


However the most important thing to get from this is I am a random idiot on the internet. I believe I heard from my sister's ex-husbands cousin's dog walker that there are people who do other people's taxes as a vocation. But that's just 4th hand information and again, I'm a random idiot on the internet.
So I’ll pay taxes again on the original money I bet with?
You go to the book and bet a game at -110. You wager $110 to win $210 (your original $110 back plus $100). You don't pay taxes on the return of your $110.
So I can keep track by subtracting my deposits from my payouts? This is reported as other income on schedule 1 line 8 of form 1040?

What if I don’t itemize my deductions?
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Re: Taxes on Sportsbook/Gambling Winnings

Post by bob60014 »

With the easy availability of sports/online gambling, I bet that there will be many people that get in trouble, tax and otherwise!
flyfishers83
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Re: Taxes on Sportsbook/Gambling Winnings

Post by flyfishers83 »

I believe if you don't itemize you can't deduct your losses. The IRS has some publications and interactive tools to walk through the determination.
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skives19
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Re: Taxes on Sportsbook/Gambling Winnings

Post by skives19 »

flyfishers83 wrote: Thu Apr 01, 2021 10:48 am I believe if you don't itemize you can't deduct your losses. The IRS has some publications and interactive tools to walk through the determination.
That’s correct. I’m just trying to figure out if I claim the whole payout as income or the difference between the payout and my wager?
Katietsu
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Re: Taxes on Sportsbook/Gambling Winnings

Post by Katietsu »

You will need to report the entire winnings as income. If you are not a professional gambler or do not benefit from itemizing, you will not be able to take advantage of your losses. Your at risk wager is never relevant if you win. I would track actual losses in case you are able to itemize. At least some of these organizations can provide a report of your losses.
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Re: Taxes on Sportsbook/Gambling Winnings

Post by jebmke »

skives19 wrote: Thu Apr 01, 2021 11:04 am
flyfishers83 wrote: Thu Apr 01, 2021 10:48 am I believe if you don't itemize you can't deduct your losses. The IRS has some publications and interactive tools to walk through the determination.
That’s correct. I’m just trying to figure out if I claim the whole payout as income or the difference between the payout and my wager?
You report the whole payout as income. Netting is not permitted.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Doom&Gloom
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Re: Taxes on Sportsbook/Gambling Winnings

Post by Doom&Gloom »

Be sure to check how your State taxes gambling winnings. Some States have some very quirky, illogical, and unfair laws.

I know that Wisconsin does--or at least did several years ago. I think perhaps IL and MI do/did as well, but I am not sure. IIRC those laws were more easily tracked by slot machine win/loss reports but applied to all types of wagers.
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skives19
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Re: Taxes on Sportsbook/Gambling Winnings

Post by skives19 »

jebmke wrote: Thu Apr 01, 2021 11:56 am
skives19 wrote: Thu Apr 01, 2021 11:04 am
flyfishers83 wrote: Thu Apr 01, 2021 10:48 am I believe if you don't itemize you can't deduct your losses. The IRS has some publications and interactive tools to walk through the determination.
That’s correct. I’m just trying to figure out if I claim the whole payout as income or the difference between the payout and my wager?
You report the whole payout as income. Netting is not permitted.

I read an article that said in Michigan you don’t count your wager as part of your winnings according to state officials.

https://www.google.com/amp/s/www.mlive. ... utType=amp
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Re: Taxes on Sportsbook/Gambling Winnings

Post by jebmke »

I have no knowledge on Michigan state income tax regs. In MD it is already included in the AGI so is fully taxed. On the Federal return you report the gross payout as income and deduct "losses" (up to the amount of winnings) on Schedule A. Losses include the cost of the wager (e.g. lottery tickets, bets at the track ...)
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
hamhocs
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Re: Taxes on Sportsbook/Gambling Winnings

Post by hamhocs »

The 24% is the amount that casinos are required to withhold when you have winnings of a certain amount.
MrJedi
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Re: Taxes on Sportsbook/Gambling Winnings

Post by MrJedi »

If the original wager is counted as winnings/income, what if you bet a major favorite? Say you wager $1000 to win $100. You would be payed back $1100, but then get taxed on $1100? Potentially netting you with less money than you began with? Doesn't seem right to me, but I'm not an expert on the subject.
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Godot
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Re: Taxes on Sportsbook/Gambling Winnings

Post by Godot »

MrJedi wrote: Thu Apr 01, 2021 2:10 pm If the original wager is counted as winnings/income, what if you bet a major favorite? Say you wager $1000 to win $100. You would be payed back $1100, but then get taxed on $1100? Potentially netting you with less money than you began with? Doesn't seem right to me, but I'm not an expert on the subject.
From IRS: https://www.irs.gov/forms-pubs/about-form-w-2-g

File this form to report gambling winnings and any federal income tax withheld on those winnings. The requirements for reporting and withholding depend on:

- the type of gambling,
- the amount of the gambling winnings, and
- generally the ratio of the winnings to the wager.

This suggests you will report your net winnings, and not the wager itself (which only makes sense).
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MrJedi
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Re: Taxes on Sportsbook/Gambling Winnings

Post by MrJedi »

Godot wrote: Thu Apr 01, 2021 2:15 pm
MrJedi wrote: Thu Apr 01, 2021 2:10 pm If the original wager is counted as winnings/income, what if you bet a major favorite? Say you wager $1000 to win $100. You would be payed back $1100, but then get taxed on $1100? Potentially netting you with less money than you began with? Doesn't seem right to me, but I'm not an expert on the subject.
From IRS: https://www.irs.gov/forms-pubs/about-form-w-2-g

File this form to report gambling winnings and any federal income tax withheld on those winnings. The requirements for reporting and withholding depend on:

- the type of gambling,
- the amount of the gambling winnings, and
- generally the ratio of the winnings to the wager.

This suggests you will report your net winnings, and not the wager itself (which only makes sense).
Thanks, that seems logical to me. I don't sports gamble but was curious. A lot of misinformation in this thread.
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Re: Taxes on Sportsbook/Gambling Winnings

Post by hamhocs »

Godot wrote: Thu Apr 01, 2021 2:15 pm
MrJedi wrote: Thu Apr 01, 2021 2:10 pm If the original wager is counted as winnings/income, what if you bet a major favorite? Say you wager $1000 to win $100. You would be payed back $1100, but then get taxed on $1100? Potentially netting you with less money than you began with? Doesn't seem right to me, but I'm not an expert on the subject.
From IRS: https://www.irs.gov/forms-pubs/about-form-w-2-g

File this form to report gambling winnings and any federal income tax withheld on those winnings. The requirements for reporting and withholding depend on:

- the type of gambling,
- the amount of the gambling winnings, and
- generally the ratio of the winnings to the wager.

This suggests you will report your net winnings, and not the wager itself (which only makes sense).
What are you referring to? These are the requirements for the payee to file a Form W2G, not the taxpayer
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Godot
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Re: Taxes on Sportsbook/Gambling Winnings

Post by Godot »

You are correct. Time for new eyeglass prescription!

A payer is required to issue you a Form W-2G, Certain Gambling Winnings if you receive certain gambling winnings or have any gambling winnings subject to federal income tax withholding. You must report all gambling winnings as "Other Income" on Form 1040 or Form 1040-SR (use Schedule 1 (Form 1040) PDF), including winnings that aren't reported on a Form W-2G PDF. When you have gambling winnings, you may be required to pay an estimated tax on that additional income. For information on withholding on gambling winnings, refer to Publication 505, Tax Withholding and Estimated Tax.
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hamhocs
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Re: Taxes on Sportsbook/Gambling Winnings

Post by hamhocs »

Godot wrote: Thu Apr 01, 2021 2:48 pm You are correct. Time for new eyeglass prescription!

A payer is required to issue you a Form W-2G, Certain Gambling Winnings if you receive certain gambling winnings or have any gambling winnings subject to federal income tax withholding. You must report all gambling winnings as "Other Income" on Form 1040 or Form 1040-SR (use Schedule 1 (Form 1040) PDF), including winnings that aren't reported on a Form W-2G PDF. When you have gambling winnings, you may be required to pay an estimated tax on that additional income. For information on withholding on gambling winnings, refer to Publication 505, Tax Withholding and Estimated Tax.
But I also think that the amount of wager is not counted. If I make a $100 bet with a friend, I would pay after the bet and one of us would have $100 winnings. But a sportsbook obviously can't operate like that. You can't have a loss on a winning bet.
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Re: Taxes on Sportsbook/Gambling Winnings

Post by pshonore »

I don't believe you'll get a tax slip unless your winnings exceed 600 times your bet amount. And multiple bets on one ticket count the number of combinations. Lets say you like four horses in a trifecta (pick the first, second and third horses to finish in order. There are 24 possible combinations using four horses. A $1 Trifecta "box" would cost $24. Unless the payout exceeded $1440 (600 x 24) , there would be no tax reporting. In the old days there were folks known as "ten percenters" hanging around the track. They would go up to a betting window and cash any ticket for 10% of the value. The assumption was they had fake id.
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Re: Taxes on Sportsbook/Gambling Winnings

Post by calwatch »

All the Las Vegas gambling books talk about "sessions" which are NET winnings in a given reasonable period (usually defined as walking in and walking out of a casino, without taking a long break). So if you walk into a casino, play a few slot machines and video poker, and maybe some table games, that's a session.

It's not like if you played $2,000 in blackjack (flat betting) and won half your bets, and lost half of them, that the gain in other income was $2,000 and the $2,000 you lost can only go as an itemized deduction. The net profit of this session was zero.

Interestingly the IRS came up with the "accession of wealth" argument which means that you only accede wealth when you redeem "tokens". In an online context, this could mean that you only count winnings when you withdraw. https://www.irs.gov/pub/irs-utl/am2008011.pdf

The issue is gambling losses beyond a session, which can only be deducted as an itemized deduction.
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Re: Taxes on Sportsbook/Gambling Winnings

Post by hamhocs »

calwatch wrote: Thu Apr 01, 2021 3:39 pm All the Las Vegas gambling books talk about "sessions" which are NET winnings in a given reasonable period (usually defined as walking in and walking out of a casino, without taking a long break). So if you walk into a casino, play a few slot machines and video poker, and maybe some table games, that's a session.

It's not like if you played $2,000 in blackjack (flat betting) and won half your bets, and lost half of them, that the gain in other income was $2,000 and the $2,000 you lost can only go as an itemized deduction. The net profit of this session was zero.

Interestingly the IRS came up with the "accession of wealth" argument which means that you only accede wealth when you redeem "tokens". In an online context, this could mean that you only count winnings when you withdraw. https://www.irs.gov/pub/irs-utl/am2008011.pdf

The issue is gambling losses beyond a session, which can only be deducted as an itemized deduction.
I really think this needs addressed soon with many states legalizing online gambling. I do agree with the session for a casino as you stated, but for sports betting I am under the impression that each bet is an event and sessions don't come into play here. It makes no sense though. You could put $100 in an account and make a bunch of $10 bets until your account balance is $0 and have a couple hundred in winnings. And most likely not itemize so couldn't deduct the losses.
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Re: Taxes on Sportsbook/Gambling Winnings

Post by calwatch »

hamhocs wrote: Thu Apr 01, 2021 3:53 pm I really think this needs addressed soon with many states legalizing online gambling. I do agree with the session for a casino as you stated, but for sports betting I am under the impression that each bet is an event and sessions don't come into play here. It makes no sense though. You could put $100 in an account and make a bunch of $10 bets until your account balance is $0 and have a couple hundred in winnings. And most likely not itemize so couldn't deduct the losses.
The IRS has never addressed roommate situations properly either despite it being extremely common. I expect most people will do what they do, and if the "superaudit" (the National Response Program audit) hits, they'll just gracefully lose the reverse lottery.

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btq96r
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Re: Taxes on Sportsbook/Gambling Winnings

Post by btq96r »

If you're using an app for your betting, it should have a financial section on the app to let you see statements and transactions. I use Draft Kings and it even has a tax forms page, but since my winnings for a given year didn't reach $600, I wasn't issued a form W-2G.
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Re: Taxes on Sportsbook/Gambling Winnings

Post by Stinky »

btq96r wrote: Thu Apr 01, 2021 11:28 pm If you're using an app for your betting, it should have a financial section on the app to let you see statements and transactions. I use Draft Kings and it even has a tax forms page, but since my winnings for a given year didn't reach $600, I wasn't issued a form W-2G.
Thanks for sharing.

On the Draft Kings app, are the "winnings" on the tax forms page calculated using "gross" winnings (that is, without deducting your bets from your wins) or "net" winnings (that is, deducting your bets from your wins)?

I would hope that whatever Draft Kings is doing is "IRS approved".
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JoeRetire
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Re: Taxes on Sportsbook/Gambling Winnings

Post by JoeRetire »

skives19 wrote: Thu Apr 01, 2021 8:27 am Is it correct that the federal tax rate on sportsbook/gambling winnings is a flat 24%?
No. That is incorrect.
My second question is what are consider winnings? I’ve read a couple different things. Lets say I place a $50 bet and it pays out $100. Do I pay tax on the $100 or just the $50 I won?
$50.
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btq96r
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Re: Taxes on Sportsbook/Gambling Winnings

Post by btq96r »

Stinky wrote: Fri Apr 02, 2021 5:45 am Thanks for sharing.

On the Draft Kings app, are the "winnings" on the tax forms page calculated using "gross" winnings (that is, without deducting your bets from your wins) or "net" winnings (that is, deducting your bets from your wins)?

I would hope that whatever Draft Kings is doing is "IRS approved".
No idea, haven't seen the tax form. The summary shows Bet Winnings, Stakes Wagered, and Win/Loss (Bet Winnings minus Stakes Wagered), however.

I would imagine it's done very similarly to how casino sports books report winnings because these are just virtual sports books. Same as if you went to the counter of a casino to make a bet and get back a ticket and a drink voucher. Hard to think that a publicly traded company trying to show sports gambling as an acceptable middle class vice would ignorant of tax law regarding the conduct of their business.
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Re: Taxes on Sportsbook/Gambling Winnings

Post by pshonore »

I can walk into a sportsbook and make a bet in person and get a ticket (just like the old racetracks). If I win, I cash the ticket and no taxes are due assuming I'm under the 600 to 1 limit. Or I can place the bet through their app. I would hope the tax reporting would be the same. Living in CT and doing taxes, I saw many, many slot machine winning slips and some with withholding. In those days if you used a "wampum" card, you got a year end report of winnings and losses.
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Re: Taxes on Sportsbook/Gambling Winnings

Post by calwatch »

By IRS decision though, winnings are calculated on a per session basis. Player card tracking provides a nice guideline but does not replace your personal reporting. Now, I think that you could argue that since money is deposited to a sportsbook or daily fantasy site, that a session ends when the funds are withdrawn. There is no IRS guidance otherwise, unlike with in-person gambling.
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Re: Taxes on Sportsbook/Gambling Winnings

Post by grabiner »

pshonore wrote: Mon Apr 19, 2021 10:10 am I can walk into a sportsbook and make a bet in person and get a ticket (just like the old racetracks). If I win, I cash the ticket and no taxes are due assuming I'm under the 600 to 1 limit.
Taxes are still due on gambling winnings (or any other form of income) even if they are not reported on a 1099 and nothing is withheld.
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Re: Taxes on Sportsbook/Gambling Winnings

Post by pshonore »

grabiner wrote: Wed Apr 21, 2021 7:44 pm
pshonore wrote: Mon Apr 19, 2021 10:10 am I can walk into a sportsbook and make a bet in person and get a ticket (just like the old racetracks). If I win, I cash the ticket and no taxes are due assuming I'm under the 600 to 1 limit.
Taxes are still due on gambling winnings (or any other form of income) even if they are not reported on a 1099 and nothing is withheld.
I can't argue with that but taxes are also due if you buy a $1 lottery scratch ticket and have a $2 winner. I think its safe to say no one reports those nor does the government care.
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