Do You Have to Pay Taxes on Sports Betting?

Winnings from sports betting are considered taxable income by the Internal Revenue Service (IRS) and must be reported on your annual tax return. This applies to all forms of gambling profits, including those from online sportsbooks, retail locations, and lotteries. The IRS considers these funds income even if you do not withdraw them from your betting account. The tax rate on these winnings depends on your total annual income, placing them in the same category as ordinary income with rates from 10% to 37%.

Calculating Your Taxable Gambling Income

The IRS defines gambling income as cash winnings and the fair market value of non-cash prizes, such as cars or trips. You must report the full amount of your gross winnings for the year as income; you cannot subtract your losses from your wins and report the net amount. This distinction impacts your adjusted gross income (AGI), which can affect your eligibility for certain tax credits.

The tax code allows for the deduction of gambling losses, but this deduction has limitations. Your deductible losses cannot exceed the amount of your reported gambling winnings for that same year. For instance, if you have $3,000 in winnings and $4,000 in losses, your deduction is capped at $3,000. You cannot use the remaining $1,000 in losses to reduce other taxable income.

To claim this deduction, you must itemize deductions on your tax return. If you take the standard deduction, you cannot deduct any of your gambling losses. For the 2025 tax year, the standard deduction is $15,000 for single filers, $30,000 for those married and filing jointly, and $22,500 for heads of household.

Consider a scenario where a bettor has $5,000 in total winnings and $3,500 in total losses for the year. They must report the full $5,000 as “Other Income” on their tax return. If they choose to itemize their deductions, they can then list the $3,500 in losses as an itemized deduction. This effectively means they are taxed on a net of $1,500 from their gambling activities, but only if their total itemized deductions exceed the standard deduction amount.

Required Tax Forms and Documentation

You may receive an IRS Form W-2G, “Certain Gambling Winnings,” from a sportsbook for a significant win. A sportsbook must issue this form if your winnings are $600 or more and the payout is at least 300 times your wager. This form details your winnings and any federal income tax withheld. For winnings over $5,000, the sportsbook is required to withhold 24% for federal taxes, and a copy is sent to both you and the IRS.

It is a common misconception that if you do not receive a W-2G, your winnings are not taxable. The responsibility to report all gambling income rests with the taxpayer, regardless of the amount or whether a form was issued.

To accurately report your gambling activity, you should maintain a detailed log or diary. This record should include the date of each wager, the type of bet placed, the amount you won or lost, and the name and location of the sportsbook. Keeping supporting documents like tickets, payment slips, and account statements is also recommended to substantiate your reported winnings and any losses you deduct.

How to Report Winnings and Losses on Your Federal Tax Return

After calculating your winnings and losses, you report these figures on your federal tax return, Form 1040. Your gross gambling winnings are reported on Schedule 1 of Form 1040 on the line for “Other income.” You must report the full amount of your winnings here, not the net amount after losses.

If you choose to itemize, you report your gambling losses on Schedule A of Form 1040, on the line for “Other Itemized Deductions.” The amount of losses you claim cannot be more than the winnings you reported. The decision to itemize should be made by comparing your total itemized deductions to the standard deduction for your filing status.

These rules apply to casual gamblers. Individuals who engage in sports betting as their primary business are considered professional gamblers. They report their winnings and expenses on Schedule C, “Profit or Loss from Business.”

State and Local Tax Obligations

Beyond federal requirements, your sports betting winnings are likely subject to state and local income taxes. Most states with an income tax consider gambling profits to be taxable, though specific rules and tax rates can differ significantly from one state to another.

An additional complication can arise if you place a winning bet in a state where you are not a resident. Most states tax all income earned within their borders, regardless of the taxpayer’s residency. This means you could have a tax liability in the state where you won the money. In such cases, your home state will likely still require you to report the winnings but may provide a credit for the taxes you paid to the non-resident state to avoid double taxation.