Business

The stakes in football are booming. Don’t forget about the tax if you win

Algerina Perna | Baltimore Sun | MCT | Getty Images

It seems like Americans are definitely ready to bet on football.

Moving into the 102nd season of the National Football League – which started last week – about 45.2 million Americans are said to be thinking about betting on games, about 36% from a year ago, according to research by the American Gaming Association. The growth comes when half of the states now offer legalized sports betting and others are preparing to do so.

This means that your winning bets may be subject to taxation even before it reaches you, depending on how big it is. And if you earn money through unregulated channels, you’ll expect to make it up to the IRS in fiscal time.

“Whether you enjoy betting on races, join a fantastic football league, join friends in bingo – or have other gambling hobbies – the winnings are completely taxable and you have to report the income on your own. [tax] back, ”said Susan Allen, senior manager for fiscal and defense policy with the American Institute of CPA.

Since the Supreme Court overturned a federal law in 2018 that banned sports betting in most places, the number of states that have legalized the activity has reached 32, with 26 of them plus Washington, DC, with available bets, said the gaming association. Another five-state system may be operational by the end of the season.

In general, 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 Form W-2G that you can receive from the payer, depending on how much you win. Fantasy sports players who win more than $ 600 usually receive a Form 1099-MISC or 1099-K, depending on how they pay the money.

Remember, those forms also go to the IRS. And if you fail to report the income, you can count on it to hear from the tax agency.

Also be aware that your final tax bill may be higher or lower than the amount withheld from the casino or by another payer, depending on a variety of factors including your other income. And even if no tax is levied, you don’t run away to claim the income on your return.

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One way to reduce what you owe on your winnings is to offset your gambling losses – if you can.

“You can deduct those losses in proportion to your winnings,” Allen said. “But, you have to detail and your deductions.”

However, most taxpayers do not detail why they are better off with the standard deduction, which was almost doubled under the new tax law that went into effect in 2018.

If you can specialize and have gambling expenses to deduct against winnings, make sure you can support your claims with documentation if the IRS has ever challenged your tax return.

If you win a lot, you should consult with a tax advisor before doing much of anything. In addition to making sure you set aside enough to cover any extra money because of the IRS or at the state level, it’s worth having a guide to make sure you don’t neglect strategies that could reduce your overall tax burden. .


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