Algeria Perna | Baltimore Sun | TCM | Getty Images
It looks like Americans are definitely ready to bet on football.
According to research by the American Gaming Association, with the approach of the 102nd National Football League season – which began last week – nearly 45.2 million Americans said they plan to bet on matches, compared to a year earlier. is about 36% higher. The development comes as half of states now offer legal sports betting and more are preparing to do so.
This means that your winning bets may be subject to tax before they even reach you, depending on their size. And if you’re making money through unregulated channels, you’re supposed to reach the IRS at tax time.
“Whether you like to bet on races, join a fantasy football league, join friends at bingo – or have other gambling hobbies – winnings are fully taxable and you have to report your income. [tax] Returns, ”said Susan Allen, senior director of tax policy and advocacy with the American Institute of CPAs.
Since the Supreme Court overturned a federal law in 2018 banning sports betting in most places, the number of states that have legalized the activity has grown to 32, including 26 plus Washington, DC, are available with betting , said the Gaming Association. The systems of the other five states could be operational by the end of the season.
Typically, if you win more than $ 600 for a sports bet and the amount is 300 times the original bet, the payer is required to withhold 24% of your winnings for federal taxes, according to the IRS.
There is also a W-2G form that you can receive from the payer, depending on how much you earn. Fantasy sports players who earn more than $ 600 usually receive a 1099-MISC or 1099-K form, depending on how the money is paid out.
Remember that these forms are also forwarded to the IRS. And if you don’t declare your income, you can count on news from the tax authorities.
Also note that your final tax bill may be more or less than the amount withheld by the casino or another payer, depending on various factors, including your other income. And even if no taxes are withheld, you are not immune to claiming the income on your tax return.
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One way to reduce what you owe on your winnings is to write off your gambling losses – if you can.
“You can deduct these losses to the extent of your winnings,” Allen said. “But, you have to reduce your deductibles.”
However, most taxpayers do not detail because they are better off with the standard deduction, which nearly doubled under the new tax law that came into effect in 2018.
If you are able to itemize the deductions and gambling expenses to be deducted from winnings, be sure to back up your claims with documents if the IRS questions your tax return. will be able
If you are winning big, you should consult a tax advisor before doing anything. To make sure you’ve set aside enough to cover any excess money at the IRS or state level, it’s worth seeking advice to make sure you don’t overlook any strategies that may affect your business. overall income. to reduce the tax burden.