In America, we love to take risks, after all, with great risk comes great reward, right? So it is no wonder then why our nation employs a multi billion-dollar sports gambling industry. In 2012, the American Gambling Association reported that sports wagering in Nevada (where sports gambling is legal) totaled 3.45 billion. However, it was recently released by the National Gambling Impact Study Commission that Uncle Sam is missing out on an estimated $380 billion annually in illegal sports gambling. When it comes to sports gambling (the legal kind that is) the word ‘winning’, in the instance you won a bet on the Super Bowl say, can be quite deceiving. As the more accurate reality of such a winnings is a number that is depicted prior to multiple forms of taxation. Here are the basics on how sport gambling is taxed.
Reported Winnings
Any and all sports pool winnings are considered by the Internal Revenue Service to be taxable income. For example if you win at least 300 times your betting amount in any wager pool, say on a horse race, and your payout amount is greater than $600 you will be asked to provide your social security number to the gambling facility in which they will then use on the report form that they send off to the Internal Revenue Service. In addition, a federal tax will be withheld on any winnings greater than $5000.
Federal Withholding Tax
The government, and further the Internal Revenue Service, requires that facilities that allow gambling on sports of any kind withhold a 25 percent tax on your winnings. This tax is known as Federal Withholding Tax. Beware though if you decide upon winning and you do not want to share 25 percent of your winnings with Uncle Sam and so you refuse to provide the facility with your social security number the tax will then be increased to 28 percent of which you will end up paying in due time.
Tax Season, the Most Wonderful Time of the Year
Obviously tax season is not the most wonderful time of the year, especially if you are into sports gambling. You can expect to receive a W-2G in the mail with a totaled amount of all your reported winnings throughout the year and what taxes were withheld, and you will still have to further file taxes on such winnings. Be diligent in recording all of your losses as they pertain to sports gambling throughout the year, as when the time comes to file you can include any and all losses as ‘miscellaneous deductions’ and in some cases these losses will offset your winnings (however, you can only report losses to the extent of your winnings). In recording such losses throughout the year be mindful to record the date and type of your wager, note the name and specific location or address of the establishment. Remember names of any witnesses present when you won or lost and the amount that you won or lost.
Due to federal regulations and laws the practice of sports gambling is strictly limited and restricted in many states. In fact, currently there are only four states in which it is legal to partake in land-based sports betting which is Nevada, Oregon, Montana and Delaware. Due to such restrictions in which sports gamblers have access to betting on land, online-based sports betting is the more popular of the options available to gamblers. The accessibility factor plays a vital role in gamblers decision to participate in online gambling as there are a magnitude of online sportsbook sites that allow individuals to partake in real life, money winning, and most importantly, legal sports gambling.