Just when you thought you hit the big score in sports betting, Uncle Sam comes knocking every year to collect your winnings.
So if you make a lot or a little money on post-action betting picks, April 15th is the deadline to declare it as taxable income.
Perhaps you got my prediction on Jon Jones right by submitting +700 in March 2023, or next year’s against Hideki Matsuyama, where Michael Levov won an outright 80-1 in February. You may be preparing for a big tax return. At the post, you can receive support from tax experts.
Alison Flores, H&R Block’s Tax Lab Manager, answered some basic sports betting tax questions ahead of the tax deadline.
As with all income, tax rates range from 10 percent to 37 percent, depending on your tax bracket.
Use this as a solid base of knowledge when placing bets throughout the year. However, for more complex and detailed answers regarding your sports betting tax obligations, please contact a tax professional.
Mr. Flores’ answers are in italics.
What is the minimum amount needed to win on sports betting to pay taxes?
- “There is no minimum amount required to win to pay taxes. Any winnings will be included in your gross income. One caveat is that you can deduct your betting losses to the extent of your winnings, but you will need to itemize your deductions to claim your losses.“
What is the tax rate?
- “Your sports betting winnings are considered taxable income. Specifically, they are considered ordinary income on your tax return. If you make a bet and win money, your tax rate will be 10% depending on your income. % to 37%. Tax classification”
If I make $5,000 on DraftKings and lose $5,000 on FanDuel, will the difference be evened out for tax purposes?
- “Unfortunately, you cannot combine wagers when filing your taxes. Each wagering transaction must be reported separately.”
Will the sportsbook record the winnings for me or will I handle it?
- “Typically, a betting organization or platform will send you Form W-2G or Form 1099-MISC depending on your activity. For sportsbook activities, if you win more than $600 and the odds are more than 300/1, the platform must issue you with his IRS Form W-2G. They will need to provide you with a form, which you will need to submit along with your taxes. Even if you have not received a form, you must still report your winnings on taxes.“
- “If you have a winnings of $5,000 or more, the company may withhold 24% of your winnings as federal income tax. In this case, it will appear in Box 4 of your W-2G. In certain circumstances, you may also be subject to a backup withholding tax, which is also 24%.“
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A note to daily fantasy players…
- “If you play fantasy sports, the platform will issue you a Form 1099-MISC if your net income for the year exceeds $600. For fantasy sports activities, wagers are typically deducted from your winnings.“
- “To complete your tax return, report your winnings as “gambling income” on Form 1040, Schedule 1. If you have a loss, itemize your deductions and report them on Schedule A.“
Do I have to pay taxes on my gambling winnings if I keep them in my betting account without withdrawing them?
- “Individuals report income that is within their control. In this example, the income is within their control, meaning they can constructively choose to receive the income and remit it. If a bettor keeps unwithdrawn winnings in their account, those winnings are subject to taxation. Depending on the type and amount of the winnings, the taxpayer may or may not receive a 1099. ”
- “We recommend keeping very good records. You shouldn’t be double taxed on your income. Keep everything you earn in 2023 in FanDuels or DraftKings and keep everything in 2024. If you transfer to PayPal, you may get duplicate 1099s, which may result in a 1099-K later on. Therefore, you must keep proper records to show what is being transferred. These sites provide an overview of transactions across players and provide proof of transactions.”
