Sports betting has become increasingly popular in the US over the past few years. With more states legalizing sports betting, more and more people are getting in on the action. But with any luck, comes the possibility of winnings, and with winnings, come taxes. Uncle Sam loves to get his share of your winnings, and if you’re not careful, you could be on the receiving end of an unpleasant surprise from the IRS. Here’s some advice on how to responsibly pay taxes on US sports betting winnings.
Know the Rules
It’s important to know the rules around betting and taxes in the US. In general, the IRS requires you to report any gambling or lottery winnings as income and pay taxes on them at the end of the year.
Keep Detailed Records
If you’ve won money from sports betting, you’ll need to keep detailed records of your winnings and losses. That includes saving the ticket or receipt of your wager, any records of payout amounts, and any other documentation that would prove your winnings from the sportsbook.
Know the Difference Between Professional and Non-Professional Gambling Activities
When it comes to tax time, the IRS will distinguish between professional and non-professional sports bettors. Professional sports high rollers are considered “engaged in the trade or business” and will face different tax implications than casual bettors.
Calculate Your Winnings
When it comes to gambling winnings, it’s important to keep track of your net earnings and losses. This means calculating your winnings minus any losses. You’ll need to report all your winnings, even if you had some losses, and this will be calculated as your net winnings.
What Taxes Are Owed?
You’ll need to pay federal and state taxes on your sports betting winnings, depending on your state’s laws. Each state has their own rules around gambling winnings, and you’ll need to check with your state’s taxes department to find out what taxes you’ll owe.
Report Your Winnings on Your Tax Return
Once you’ve calculated your total winnings and any losses, you’ll need to report it on your tax return. You’ll need to include your winnings on your 1040 form, and be sure to list it as “other income”.
Conclusion
Sports betting can be an exciting activity, and potentially, a source of income. But it’s important to stay on top of your taxes and to responsibly pay taxes on any US sports betting winnings. Doing your due diligence and knowing the rules and regulations can save you a lot of headaches down the road.
What is the tax rate on sports betting winnings in the US?
The tax rate on sports betting winnings in the US depends on the individual’s total taxable income and filing status. Generally, sports betting winnings are subject to federal income tax of up to 37%. In addition, some states levy their own taxes on sports betting winnings.