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Do You Pay Taxes on Winnings From Sports Betting?

From the dawn of athletic competition to the contemporary world of professional sports betting, it has consistently been intertwined with the game. Whether you're talking about ancient times or today's big leagues, the mix of sports and betting has been a long-lasting tradition.

There are many different ways to go about sports betting, whether betting on a horse, following a March Madness bracket, placing a wager on a Stanley Cup winner or participating in an online fantasy football league. Whatever your forte is, you need to know the tax rules and regulations surrounding sports betting. Not reporting your wins could mean IRS penalties or even jail time.

By following the guidelines, you’ll be on track to know which sports betting winnings are taxed, how to report them and what to do if you’re a professional gambler.

Are the winnings from sports betting taxed?

Yes, and the winnings must be included on your tax return. The IRS indicates that you must pay taxes on all winnings and treats them as taxable income, just like a salary or capital gain.

If you win the neighborhood Super Bowl pool, your neighbor is  unlikely to report your winnings to the IRS. But whether you do or not is in your hands.

 Infographic entitled Top 5 Most Popular Online Sports Betting Platforms listing the most popular online platforms for sports betting.

If you bet using a verified online sports betting platform like FanDuel, they are required to send a copy of your winnings to the IRS. So, you better report them on your tax return.

Who pays taxes on the winnings for sports betting?

Everyone who wins any income from gambling is responsible for reporting the winnings on their tax return.

What sort of taxes do I have to pay from sports betting?

Taxes on sports betting are inevitable, whether you're a gambling pro or a hobby player.

Income taxes

Your winnings are taxed following the IRS federal income tax rates, just like any other type of income.

Self-employment taxes

If you make $600 or more in gambling income as a self-employed individual, you need to pay self-employment taxes to cover Social Security and Medicare. Your employer covers half of these taxes when you’re a W-2 employee, but as someone self-employed, it’s up to you to cover the total amount.  

State taxes

Depending on which state you live in, you might need to pay state income tax. It’s always best to consult a CPA for state filing advice. FlyFin’s CPAs are available wherever you need them and can offer unlimited CPA support.

Infographic entitled  States Without Income Taxes listing the US states with no income tax requirements on earnings from self-employment.

Gambling , or it might be legal in person but not online, or vice versa. So it’s best to check your local rules and regulations.

Do I pay taxes if I’m a professional gambler?

Gambling might be your main source of income, and you might consider yourself a professional gambler. Or, you might think of gambling as your hobby and something you do occasionally in your free time.

One thing to keep in mind is that you might not consider yourself a professional gambler but all winnings are subject to taxation, whether you’re hitting the slots for fun or joining a professional game of poker.

Can I deduct my gambling losses?

Unfortunately, not everyone can deduct their losses from their taxes. You can deduct your losses if you’re a professional gambler or you itemize your deductions.

What other sports betting deductions can I take?  

As a professional gambler, you can deduct some of the costs associated with your line of work as long as they are ordinary and necessary.

Some of the self-employed deductions you can take are:

  • A portion of your internet or utilities bills if working from home
  • Home office
  • Cell phone
  • Streaming fees

If you work from home and are a professional online fantasy football player, you can deduct your home office, even if it’s a laptop in the corner of your kitchen, plus the business use of your internet and utilities.

To write off your home office, you’ll first need to make sure it is your primary place of business and that you use it regularly.

Next, you’ll need to measure the square footage of your home and then the square footage of your office. Then, calculate your home office as a percentage of your overall home. So if your home is 1,500 square feet and your home office is 150 square feet, the business use percentage of your home office is 10%.

If you want to write off your utilities, internet and phone bills, you’ll need to calculate the percentage that’s used for work. If you use the internet to work with clients 40% of the time and 60% of the time for Netflix, you can write off 40% of your phone bill. This same strategy applies to your phone and utility bills.

FlyFin’s A.I. can help you find every possible deduction, so you'll never have to overpay taxes on your again. FlyFin can also help with your home office, internet and utility deductions as a self-employed gambler.  

FlyFin CPA Team

FlyFin CPA Team

With a combined 150 years of experience, FlyFin's CPA tax team includes tax CPAs, IRS Enrolled Agents and other tax professionals, offering users the most comprehensive tax advice and preparation.

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