Uncle Sam’s Cut: A Guide to Reporting Gambling Income
With the advent of online sports betting and mobile friendly sportsbooks, more people than ever are discovering the fun and excitement that wagering on sports can offer. While most sportsbooks will not directly report the amount and total of your yearly winnings to the IRS, it remains your responsibility to declare your winnings for tax purposes, as your winnings are considered income from the moment your account is credited.
Any gambler who receives a payout that is both 300 times the original bet as well as totaling more than $600 will be asked by the sportsbook for their social security number so that a qualifying payout can be reported. Smaller payouts are eligible for taxation as well, but must be reported by the winner on their yearly taxes.
The United States government also requires that 25 percent of a sports betting payout totaling more than $600 must be immediately withheld by the gaming institution as federal taxes. If a bettor refuses to provide a social security number to facilitate proper withholding by the institution, the winnings are taxed at an increased 28 percent rate.
When it comes time to officially report your yearly earnings, the gaming institution will typically send out Form W-2G detailing the amount won as well as the total taxes withheld from the winnings. However, even if Form W-2G is not received, it remains the responsibility of the bettor to ensure that all income from gambling is properly reported to the federal government in a timely fashion.
The other side to mandatory reporting of gambling income is the ability bettors have to reclaim some of their losses as tax deductions. This works by subtracting the lost amount from the amount won over the years, and such deductions must be itemized as well as backed up with supporting documentation such as racing stubs, bingo cards and losing lottery tickets. Losses my only be deducted to the extent of the amount won during the year, but properly tracking and reporting them can be a way to help defer or even offset entirely your tax liability for more successful gaming endeavors.
Millions of Americans find fun in the thrill of a wager, but that enjoyment comes with responsibilities when it comes to reporting taxable income. Careful management of documentation from both wins and losses is the only way to ensure that you remain in the best possible standing come tax season.