Sports betting is a popular form of gambling, but it can be confusing to understand how it works and how it gets taxed. This blog post will explain how much taxes you can expect to pay on your winnings from sports betting.
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Under current law, gambling winnings are taxable and must be reported on your tax return. The tax rate on gambling winnings is the same as your marginal tax rate. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse and dog races, and casinos. It also includes cash and the fair market value of prizes you receive from game shows.
The IRS taxes sports betting as “other income” on your 1040 tax return. This income is taxed at your marginal rate, which could be as high as 37% for some filers. In addition, you may have to pay state taxes on your winnings.
There is no special rate for sports betting winnings, so you’ll pay the same taxes as you would on any other type of income. However, there are a few ways to reduce your tax bill.
If you itemize your deductions, you can deduct your gambling losses up to the amount of your winnings. So, if you won $5,000 but lost $3,000 gambling, you would only be taxed on $2,000 of your winnings.
You can also take advantage of the professional gambler status if gambling is your main source of income. To qualify, you must gamble full-time and make a living from it. If you qualify, you can deduct your gambling losses as business expenses. This can save you a significant amount of money on your taxes.
The vast majority of states tax gambling winnings at the same rate they tax income from other sources, such as wages. The four states that do not tax gambling winnings are Delaware, Montana, Oregon and Nevada. New Hampshire and Tennessee only tax interest and dividend income.
There are a few states that have special rules for gambling taxes, however. Wisconsin taxes gambling winnings at both the state and local level, for example. And in Pennsylvania, you must pay taxes on your winnings if you were not present in the state for at least 90 days during the year preceding the year in which you won the money.
In conclusion, gambling winnings are taxable, but only if they’re considered “income”. This means that if you earn a profit from sports betting (or any other form of gambling), you will be required to pay taxes on that income. However, if you lose money gambling, you can deduct those losses from your taxes (up to the amount of your winnings).