Football betting is in full swing. Don’t forget the tax officer when you win
Algerian Perna | Baltimore Sun | MCT | Getty Images
It seems that Americans are definitely ready to bet on football.
Heading into the National Football League’s 102nd season – which started last week – about 45.2 million Americans said they plan on betting on games, which is about 36% higher than, according to a study by the American Gaming Association a year ago. The growth is due to the fact that half of the states are now offering legalized sports betting and are increasingly preparing for it.
This means that depending on the amount, your winning bets may be subject to taxation even before they reach you. And if you are making money through unregulated channels, you are expected to report to the IRS at tax time.
“Whether you enjoy betting on races, joining a fantasy football league, getting together with friends at bingo – or having other gambling hobbies – the winnings are entirely taxable and you must have the income on yours [tax] Returning, “said Susan Allen, senior manager of tax policy and advocacy for the American Institute of CPAs.
Since the Supreme Court overturned federal law in 2018 that banned sports betting in most locations, the number of states legalizing the activity has hit 32, of which 26 plus Washington, DC are available with betting, the Gambling Association said with. The systems of another five states could be operational by the end of the season.
In general, if you win more than $ 600 on a sports bet and the amount is 300 times the original stake, the IRS says the payer must withhold 24% of your winnings for federal taxes.
There is also a Form W-2G that you may get from the payer depending on how much you win. Fantasy athletes who win more than $ 600 will typically receive a Form 1099-MISC or Form 1099-K, depending on how the money is paid out.
Remember, these forms also go to the IRS. And if you don’t report the income, you can pretty much rest assured that you will hear the tax office.
Also note that your final tax bill may be higher or lower than the amount withheld by the casino or other payer, depending on a variety of factors including your other income. And even if no tax is withheld, you are not off the hook to claim the income on your tax return.
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One way to reduce your winnings debt is to write off your gambling losses – if you can.
“You can subtract those losses equal to your winnings,” said Allen. “But you need to break down your prints.”
However, the majority of taxpayers fail to provide itemization because they are better off with the standard deduction, which has been almost doubled by the new tax law that came into force in 2018.
If you are able to list gaming expenses and deduct them from winnings, make sure you have documentation to support your claims in case the IRS ever questioned your tax return.
If you are making a big profit, it is a good idea to consult a tax advisor before doing anything. Aside from setting aside enough cash to cover additional money due to the IRS or the state level, it is a good idea to seek advice to make sure you don’t overlook strategies that could reduce your overall tax burden.