Sports betting has grown increasingly popular across the US and, as a result, more individuals will need to report their winnings at tax time. Winnings are subject to tax while losses cannot be deducted even by those itemizing deductions.
The IRS levies taxes on gambling winnings at a rate based on their value; this applies to winnings from online sports betting Massachusetts sites, mobile apps and retail sportsbooks.
Federal Taxes
With the rise of new casinos and sports betting parlors, it’s crucial that you understand how gambling winnings impact your federal taxes. According to the IRS, all winnings from gambling count as taxable income; an exception would be if you consider yourself professional gambler and report all winnings using Schedule C.
If you win more than $600 at a sportsbook or casino, they will typically issue you a tax form known as 1099 or W2-G to report your winnings to the IRS. Even without this paperwork in hand, however, the IRS can detect your earnings by reviewing bank statements or other sources of income.
Your gambling losses may qualify for deduction if you itemize, though most people opt for the standard deduction instead. Up-front stakes paid before winning may also be deducted if they exceed winnings; otherwise they should be reported as other income. Unfortunately, the IRS has provided no definitive guidance as to whether or not stakes won can be deducted when winning.
State Taxes
As sports betting becomes an increasingly prevalent industry, state officials will want to capitalize on it financially. Typically, the IRS considers gambling winnings regular earned income and taxes them accordingly; any gambling losses up to the amount of your total winnings may also be deducted as tax deductions.
The IRS considers all winnings from gambling sites or apps, casinos and raffles and horse races to be taxable income; this applies both to cash winnings as well as the fair market value of non-cash prizes won. If your winnings total $600 or more, the gambling site or casino must issue you with either a W-2G or 1099-MISC form so as to report this information back to them and therefore to the IRS.
Keep track of all your wagering wins and losses to maximize tax efficiency, according to the IRS. An organized record could prove particularly helpful if you are an active gambler, providing valuable details during tax season.
Non-Resident Taxes
Most states tax winnings from gambling, including sports betting, even when won outside their state’s boundaries. If you reside in Massachusetts and win money through lottery, casino, or race track in another jurisdiction it is typically best to report this winnings with local tax authorities as soon as possible; you could potentially claim back taxes paid or claim them on your return.
If you are nonresident of the US and require filing a federal income tax return due to gambling winnings, Form 1040-NR can help. Your payment amount depends on your specific circumstances; more information on this topic can be found in Publication 519: U.S. Tax Guide for Aliens.
If any New York City or Yonkers local taxes were withheld from your gambling winnings, add them to your other NYC withholding on line 73 of your IT-201 form. Any other local taxes withheld for the year can also be added on line 74.
Online Betting
With the proliferation of online and mobile sports betting, more people are wondering whether they owe taxes on their winnings from betting. The IRS lays out clear regulations on gambling income; any profits earned through successful wagers are taxable if they exceed overall losses; itemization allows individuals to deduct losses as expenses; therefore it is imperative to maintain accurate records throughout the year regarding winnings and losses.
At first sight, winning at sports is always exciting; whether that means collecting cash at a physical sportsbook or online betting app; however, profits must be reported to the IRS and taxes paid accordingly. Individuals should keep careful records of winnings and losses associated with gambling activities including receipts, tickets and any documentation supporting your case; gambling losses cannot be used against future wagers but instead must offset winnings immediately.
