Tax Implications of Super Bowl Betting: Don’t Ignore Your Winnings

You Could Owe Taxes on Super Bowl Winnings

If you’re betting on the Super Bowl on Sunday, think twice about your plans for the winnings. Nearly half of it could be owed as taxes, which could put you in a tough spot if you spend it all ahead of filing your 2024 tax return. All gambling winnings are considered taxable income by the Internal Revenue Service, even if you aren’t a professional gambler. “Win big? You gotta pay the piper,” warns Romeo Razi, a certified public accountant based in Las Vegas.

Tracking Your Winnings and Losses

If you win or earn $600 or more using gambling websites or apps, the vendor will likely send you a W-2G tax form, which is a record of your earnings. Importantly, they send the form to the IRS, too, which means they won’t miss it. If the winnings exceed $5,000, the business that processed your bet might withhold up to 31% of the proceeds for federal income tax, according to the IRS. However, it’s essential to note that companies don’t always send those forms. Regardless, you are responsible for tracking all of your gambling income, whether you receive a form or not. The IRS recommends keeping an accurate record of your gambling winnings and losses, as well as any supporting documents such as receipts or statements.

Reporting Your Winnings and Losses

Your gambling winnings and losses are reported separately in your tax return. The winnings you claim as income include the original wager or bet, as reported on the W-2G forms. The amount is added as “gambling income” on line 8 of your Form 1040, Schedule 1, which is used to report types of income not listed on the primary 1040 tax form. That total is then added to Form 1040 line 8. Gambling losses can be deducted as an itemized deduction, and you can also include the initial wager of a bet. However, gambling losses cannot exceed the winnings you report as income.

Consider Your Deductions

Unfortunately, claiming gambling losses as a deduction can be challenging. Most taxpayers don’t itemize their deductions due to the standard deduction being more advantageous. For the tax year 2024, the standard deduction is $14,600 for single filers and $29,200 for married filers. Therefore, it may not make financial sense for the majority of taxpayers to claim their gambling losses as an itemized deduction.

The Importance of Reporting

It is crucial to report all of your gambling winnings and accurately fulfill your tax obligations. Failing to report your gambling winnings is a violation of the law, and the IRS can uncover discrepancies through various means, such as comparing your income with the W-2G forms they receive or reviewing your bank deposit activity. Penalties can be applied based on the total amount underreported. Additionally, casual gambling activities may be less noticed by the IRS, but large cash deposits can still trigger an audit.