Sports betting only became legal in the United States in 2018 after the U.S. Supreme Court struck down a 1992 federal ban and ruled that states could individually determine what forms of gambling were legal within their boundaries.
This opened the floodgates for various state legislatures to decide whether to allow sports betting. Currently, 40 states and the District of Columbia authorize the practice, and 34 permit online sports betting, according to the American Gaming Association.
This has tax implications for millions of gamblers — who are also taxpayers. There is no ambiguity here, according to tax experts.
“Broadly, winnings from sports betting are taxable income,” said April Walker, senior manager for Tax Practice and Ethics with the American Institute of CPAs.
Sports betting winnings are taxed under the Internal Revenue Service’s designation for gambling income and losses. If your winnings total $600 or more and are at least 300 times the amount wagered, then a payer, such as a casino, is required to issue you a Form W-2G.
While supplying the form is the responsibility of the payer, Walker noted, you are still liable for reporting and ensuring taxes are paid on those sports betting winnings, whether or not you receive the form.
If you’re dealing with a mobile sports gambling provider, like DraftKings or FanDuel, the reporting standards are a little different, according to New England-based accounting firm Baker Newman Noyes. If you reach net earnings above $600 or 300 times your original wager, you can also receive a Form 1099-MISC from an online sports wagering organization that will report your net earnings from the previous tax year. Net earnings would be calculated as your cash winnings minus any cash entry fees and adding any cash bonuses received from the platform.
Individual tax filers must report total gambling income as “Other income: gambling” on line 8b of Schedule 1, 1040. The only exception is if you are filing as a professional gambler, meaning someone “engaged in sports betting primarily for profit rather than only as a hobby,” per the Journal of Financial Planning. In this case, the filer would use Form 1040, Schedule C to report profit or loss from a business, and they would note winnings as revenue and be able to deduct their losses directly. Self-employed filers — in this case, professional gamblers — must pay self-employment tax, which is 15.3 percent, half of which is subject to deduction, for Social Security and Medicare.
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To answer the tax rate question, we must work backward. Taxpayers whose winnings exceed $5,000 and 300 times the amount wagered will automatically have 24% of their total payout withheld by the payer, according to Walker. This rate could be higher in states that have additional income tax, in which case the 24% federal rate would be withheld on top of the state’s personal income tax rate.
Still, when it comes time to file your income taxes, this withholding doesn’t ensure you’ve paid the required amount of tax. Rates range from 10% to 37%, depending on your total income, so based on what tax bracket you end up in at the end of the tax year, you’ll either get a refund or have to pay out a higher amount from your winnings.
Read more: How tax withholding works
Perhaps the most pivotal — and confusing — part of understanding how to report gambling income on your federal income tax return is factoring in your losses. The correct method, according to Walker, comes down to what the IRS refers to as “sessions.” This philosophy comes from a 2015 IRS notice on slot machine play, indicating that total wins and losses need to be calculated by the day they were made. Each day counts as an individual session, so rather than net your total losses against your total winnings, you will need to calculate the end amount of each session, or day, and determine which days were a loss and which days ended with winnings.
Still, the only way that losses can be offset against gambling winnings is if you itemize your deductions rather than take the standard deduction, which is $15,000 for single tax filers on 2025 taxes. Using the session method, you could add your total losses on Schedule A, line 16 as gambling losses.
Whether you can itemize your deductions to offset your winnings when it comes to state income tax depends on which state you’re filing in. Nine states, including North Carolina, Connecticut, and Rhode Island, do not allow itemized deductions for gambling losses, per an article in the Journal of Financial Planning.
Even professional gamblers can only offset their total winnings with their losses and get to zero. There is no tax refund for losses that exceed the total amount of winnings, Walker said.
To minimize sports betting taxes, the key is having a demonstrable record of all of your wagers, where and when they occurred, proof that they occurred (like receipts and tickets), and evidence of your total amount of winnings and losses. This will be particularly useful if you find yourself audited by a tax authority.
“Gambling has been around for quite a while, and so the rules on that have not changed,” Walker said. “The difference is that there might be more people who are doing it on a regular, daily basis, and I would encourage them to understand how important it is to do their bookkeeping so they are not having to scramble after the fact and if they are able to itemize, and take advantage of all of their losses.”
