Just when you thought you had hit it big with sports betting, along comes Uncle Sam every year to get their cut.
So if you’ve made a lot or a little money after choosing after-action bets, April 15 is your deadline to file that as taxable income.
You may have fulfilled my Jon Jones prediction by submitting a +700 in March 2023, or are preparing for a bigger tax filing next year for Hideki Matsuyama’s 80/1 Michael Leboeuf outright winner in February; The Post Office has you covered with some help from a tax professional.
Alison Flores, manager of the Tax Institute at H&R Block, answered some key questions related to sports betting taxes ahead of the tax deadline.
As with all income, tax rates can be anywhere between 10 percent and 37 percent, depending on your tax bracket.
Use this as a solid baseline when betting throughout the year, but contact a tax professional for more complex and detailed answers about your sports betting tax obligations.
Flores’ responses are in italics.
What is the minimum amount of money you need to win sports betting to pay taxes?
- “There is no minimum amount of money you must earn to pay taxes. If you have earnings, they are included in your gross income. One caveat to this is that you can deduct your betting losses to the extent you have winnings, but you must itemize your deductions to claim the losses.“
What is the tax rate?
- “Your sports betting winnings count as taxable income—specifically, they count as ordinary income on your return. If you’ve won money making bets, the tax rate can be anywhere from 10% to 37% based on your tax bracket.”
If I make $5,000 on DraftKings but lose $5,000 on FanDuel, does the difference even out for tax purposes?
- “Unfortunately, you cannot combine your bets when you report them on your taxes. Each bet transaction must be accounted for separately.’
Do sportsbooks register my winnings for me or do I have to deal with them?
- “Typically, the betting organization or platform will send you a Form W-2G or Form 1099-MISC, depending on your business. For sports betting, the platform must issue an IRS Form W-2G when you win $600 or more and the odds are 300/1 or greater. Although they must provide the form, you will need to file it with your taxes. If you don’t get the form, you’ll still have to report your earnings on your taxes.“
- “If you have profits of $5,000 or more, the business can withhold 24% of profits for federal income tax. If so, it will be shown in box 4 of your W-2G. You may also be subject to additional withholding in certain situations, which is also 24%.“
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Note to Daily Fantasy players…
- “If you play fantasy sports, the platform will issue a Form 1099-MISC if your net income for the year is more than $600. For fantasy sports activity, the cost of the bet will usually be netted out of your winnings.“
- “To complete your tax return, you’ll report your winnings as ‘gambling income’ on Form 1040, Schedule 1. If you have losses, you’ll report them on Schedule A if you itemize the deductions.”“
if I keep gambling winnings in a betting account and don’t withdraw them, do I have to pay tax on them?
- “Individuals will report income that is under their control. In this example, the income is under their control, meaning they constructively receive it and can choose to transfer it. If the bettor has unclaimed winnings held in an account, the winnings are subject to tax. Depending on the type and amount of earnings, the taxpayer may or may not receive a 1099.”
- “We advise them to keep very good records – the income should not be taxed twice. If they keep everything in FanDuels or DraftKings that they won in 2023 and then transfer it all to PayPal in 2024, they could get some duplicate 1099s with the possibility of a 1099-K later. So they need to keep good records to show what is being transferred. These sites can provide you with transaction summaries of the entire player, which should substantiate the transactions.
