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Via https://www.turfshowtimes.com/2019/9/5/20847562/los-angeles-rams-carolina-panthers-preview-the-professor

With the NFL season underway, there is an estimated 38 million who will be beating on the league this season, and that is just on the pro game. If you include college football and the upcoming baseball playoffs, plus NHL and NBA seasons, and college basketball, it is easy to believe that there could be as many as 100 million men and women betting on sports.

Now that the Supreme Court has made sports wagering legal, in many states it is easier than ever to place a bet on your favorite sport or team. However, figuring out exactly what you are to pay in taxes on wagers may not be as easy as you thought.

A Way for Governments to Make Money

First off, you need to face reality. The money you earn from sports wagers is going to be taxed. As Cari Weston, director of tax practice and ethics for the American Institute of CPAs, explained to CNBC, “The way it works is that any income from gambling is taxable income. It’s taxable regardless of how much you won or where you won it.”

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What needs to be understood is that gambling was not be made legal in states because representatives and government officials want to uphold a person’s right to risk their money in whatever way they want. Don’t be so naïve. The truth is that they want money. They want the revenue that comes from gambling, and taxing your winnings is the best way to get that money.

Kay Bell explained this point quite well in an article on BankRate.com. “The reason for the governmental imprimatur is the same one that tempts bettors: money. The gambling industry is an important part of many states’ economies. Gambling proceeds also help fund education programs or special state projects.”

She adds that “In most states, tax collectors get a portion of residents’ winnings. So does the IRS, which collects taxes on gambling winnings since they are considered income.”

You Are Going to Be Taxed

Another important factor to consider is that there is no exemption to paying taxes on gambling winnings. While both state and the federal governments have exemptions on other types of earned income, such as capital gains, that is not the case with gambling. You are going to have to pay on the winnings you earn.

You must understand that all income won with sportsbooks and lotteries is going to be taxed. Most importantly, it is going to be reported. For sportsbooks, online casinos, and lotteries to be in operation, they are required to report the winnings that each person makes. In some instances, winnings may be reported for each instance you win. Most often, these online sites report the total amount won (if you are on the winning side) during a three month or yearly period.

While pointing this out, it is important to address one of the most important tricks people will try. They assume that their winnings are exempt because they did withdraw it from their account. They won $9,000 during the year, but it is still in their online account, so they think they don’t have to pay tax on it. Wrong!

It is winnings, no matter who is holding onto it. Keep in mind that if you are trying to be tricky with the IRS, you are likely to find yourself in jail.

How Gambling Tax Works

That leads to the most important question of all – how much do you have to pay?

You are required to submit the total amount of money you won gambling in a year when you fill out your income taxes. However, you are only required to do so if you won more than $600. That is the law at both the federal and state levels.

There are specific tax forms related to gambling revenue. Wins are included on Form 1040, but schedule A of the losses form asks that you itemize every instance where you lost. This means that it is your obligation to prove you have lost money. It is important that you fill this form out accurately, which will be discussed later.

If you made $1,000 gambling last year but lost $500, then your total net is $500, and you are not required to report that income. It is only when your gains exceed $600 that you must include that on your tax forms.

For the most part, federal income on gambling winnings is at 24%. If you win $1,000, you are going to pay $240 in taxes. This percentage can increase depending upon the total amount earned. If you were to win hundreds of thousands of dollars in one year, you may find that your total income moves you into a new tax bracket, which could increase your tax liability.

The amount of tax you will pay in each state will depend upon the state. You will need to check with their Department of Revenue, but there is an important point you need to keep in mind. If you live in Pennsylvania and win $1,000 while you are at a casino in New Jersey, you owe that tax to New Jersey. Don’t think that living in another state bars you from paying taxes. You will be required to fill out a state income tax for the state where the casino is located if that is where you placed your bet.

Keep Accurate Records of Loses

You may be one who does not like to think about losing but if you want to reduce your tax burden, it is essential that you keep an accurate record of your tax losses. If you use several different sportsbooks this is absolutely essential. Here is why.

If you won $15,000 total from Sportsbook A and lost $10,000 from Sportsbook B, your total winnings are $5,000. That is the income you would report on your IRS form. However, that does not mean that Sportsbook B reported your losses. They may only be required to report the winnings because those are taxed. This means that if you report $5,000 in winnings and you don’t submit the losses form, the IRS may believe you won $15,000 and may come after you. Not a pleasant thought at all.

You are also going to find that gambling losses are a deduction in many states. Even if you did not make money, the sportsbook site did and the state made money from their taxes. You can claim your losses as a deduction to help increase your tax return or reduce your liability.

Get Help

Sound confusing? It can be, and we have not even gone into the details if you gamble for a living. Then the number of deductions can increase greatly.

If you are planning on gambling on a regular basis and you are having success, it may be to your advantage to hire an accountant to assist you in meeting your tax obligations. If you are placing four or five bets a week during the football season then this is not likely to be necessary, but if you are placing dozens each week all year long, hire a CPA.

Betting can be a fun activity and an incredibly lucrative one if done right. Just make sure that you don’t become a loser by not paying your taxes.

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