From Yahoo Finance: 2025-06-02 15:43:00

In 2018, the U.S. Supreme Court overturned a federal ban on sports betting, allowing states to legalize it. Currently, 40 states and D.C. permit sports betting, with 34 allowing online betting. Taxes on sports betting winnings are mandatory, with winnings over $600 subject to reporting and potential withholding.

Tax implications for sports betting winnings are clear – they are taxable income. The IRS designates them as gambling income and losses, requiring reporting on Form W-2G for certain winnings. Reporting standards for mobile sports gambling providers like DraftKings differ slightly, with net earnings over $600 subject to Form 1099-MISC.

Taxpayers must report total gambling income on their federal return under “Other income: gambling.” Professional gamblers filing as a business use Schedule C. Those earning above $5,000 have 24% withheld, and tax rates range from 10% to 37% based on total income. Losses can only offset winnings when itemizing deductions.

Understanding how to report gambling income involves calculating wins and losses by individual sessions. Losses can only offset winnings when itemizing deductions, not under the standard deduction. Some states do not allow itemized deductions for gambling losses, and professional gamblers can only offset winnings with losses, no refunds for exceeding losses.

To minimize sports betting taxes, keep detailed records of wagers, receipts, and winnings and losses. Good bookkeeping is essential, especially for regular gamblers, to avoid scrambling during tax season. Understanding the importance of proper record-keeping can help individuals take advantage of all available deductions and avoid issues with audits.

Read more: How sports betting taxes work and what you might owe