Understanding US sports betting taxes: What you must report

Legal sports betting has exploded across the United States in recent years, with millions of Americans placing wagers on the NFL, NBA, MLB, and other sports. But while most bettors focus on the excitement of the games and the payouts, many overlook one important aspect: taxes.

In the eyes of the Internal Revenue Service (IRS), sports betting winnings are taxable income—no matter how small the amount. Whether you win a $20 parlay or hit a big jackpot during the Super Bowl, your profits are legally required to be reported. Failure to do so can lead to penalties, interest, and unnecessary headaches with the IRS.

Also read: How to build a personal betting database to track performance

This guide breaks down how US sports betting taxes work, what bettors are required to report, and practical steps to stay compliant while enjoying your betting activity.

US Sports Betting Taxes: Do you have to pay taxes on sports betting winnings in the US?

Yes. The IRS classifies gambling winnings—including sports betting, casino games, horse racing, poker, and lotteries, as taxable income. That means any profit you earn from a sportsbook, whether online or in-person, must be reported on your federal tax return.

Even if your state does not require additional reporting, the federal obligation still applies.

What sports bettors must report

• All winnings: No matter how small, all gambling income is taxable. This includes winnings from sportsbooks, daily fantasy sports (DFS), and even free bet bonuses that result in cash profits.
• Form W-2G: Sportsbooks may issue you a W-2G form if you win above certain thresholds. But you’re still responsible for reporting all winnings, even if you don’t receive this form.
• Total yearly winnings: Add up all your profits across different sportsbooks and report them as “Other Income” on your IRS tax return.

Can you deduct losses?

Yes, but only under specific conditions:

• You can deduct gambling losses, but only up to the amount of your total winnings.
• Losses must be itemized on your tax return (Schedule A).
• You need proper records—betting slips, account statements, or digital transaction history—to claim losses as deductions.

State-level sports betting taxes

Beyond federal taxes, several US states with legal sports betting also apply state income tax on gambling winnings. For example:

• New York: State income tax applies to betting winnings.
• New Jersey: Winnings are taxable as state income.
• Nevada: No state income tax, but federal obligations still apply.

Always check the rules in your state of residence, as tax treatment varies.

Also read: How travel schedules impact NHL betting odds

Tips for staying compliant as a bettor

1. Keep detailed records: Track your deposits, withdrawals, wins, and losses. Screenshots or statements from sportsbooks are valid proof.
2. Report everything: Don’t assume small wins are ignored by the IRS.
3. Use tax software or a professional: Gambling income can complicate returns, especially if you bet across multiple platforms.
4. Separate betting bankroll: Keeping betting funds in a different account makes record-keeping easier.
5. Stay updated: Tax rules around online betting are evolving as more states legalize it.

FAQs

Q1: Do I have to report sports betting winnings if I only won a few dollars?
Yes. All gambling winnings, no matter how small, are considered taxable income by the IRS.

Q2: Will the sportsbook automatically report my winnings to the IRS?
In many cases, yes. Sportsbooks issue a W-2G for certain thresholds, but even if they don’t, you are still responsible for reporting all winnings.

Q3: Can I offset my winnings with my gambling losses?
Yes, but only if you itemize deductions and have proper documentation. Losses cannot exceed your total reported winnings.

Q4: Are free bets and bonuses taxable?
If a free bet leads to real money winnings, those profits are taxable and must be reported.

Q5: What happens if I don’t report my gambling winnings?
The IRS can impose penalties, interest, and audits if it finds unreported gambling income. Since sportsbooks often report winnings, it’s risky not to disclose them.