Algeria Perna | Baltimore Sun | TCM | Getty Images
It looks like Americans are definitely ready to bet on football.
Heading into the 102nd National Football League season – which began last week – an estimated 45.2 million Americans said they plan to bet on games, up about 36% from to a year ago, according to a study by the American Gaming Association. The growth comes as half of states now offer legalized sports betting and more prepare to do so.
This means that your winning bets could be subject to tax before they even reach you, depending on their size. And if you make money through unregulated channels, you have to report it to the IRS at tax time.
Whether you like betting on races, joining a fantasy football league, joining friends at bingo – or having other gambling hobbies – winnings are fully taxable and you must report the income on your. [tax] back, ”said Susan Allen, senior director of tax policy and advocacy with the American Institute of CPAs.
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, including 26 plus Washington, DC, with betting available, said the games association. The systems of five other states could be operational by the end of the season.
Generally speaking, if you win more than $ 600 on a sports bet and the amount is 300 times more than the original bet, the payer is required to withhold 24% of your winnings for federal taxes, according to the IRS.
There is also a W-2G form that you may receive from the payer, depending on how much you earn. Fantasy sports players who earn more than $ 600 usually receive a 1099-MISC or 1099-K form, depending on how the money is paid out.
Remember that these forms are also forwarded to the IRS. And if you do not report the income, you can count on news from the tax agency.
Also be aware that your final tax bill may be more or less than the amount withheld by the casino or another payer, depending on various factors that include your other income. And even if no taxes are withheld, you are not immune to claiming the income on your tax return.
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One way to reduce what you owe on your winnings is to write off your gambling losses – if you can.
“You can deduct these losses to the extent of your winnings,” Allen said. “But, you have to itemize your deductions.”
However, the majority of taxpayers do not detail as they are better off with the standard deduction, which almost doubled under the new tax law that came into effect in 2018.
If you are able to itemize and have gambling expenses to deduct from winnings, make sure you can document your claims if the IRS questions your tax return.
If you are winning big, you should consult a tax advisor before doing anything. Along with making sure you set aside enough to cover any extra money owed to the IRS or the state level, it’s worth getting some advice to make sure you don’t overlook any strategies that can reduce your burden. global tax.