US sports betting taxes explained: Find out which states charge the highest and lowest rates

Sports betting has exploded in popularity across the United States since the Supreme Court struck down the federal ban in 2018. Today, more than 30 states allow legal sports betting, both in-person and online, creating a booming industry worth billions. However, not all states are created equal when it comes to taxation. The percentage of sports betting revenue taken as tax can vary dramatically, impacting both operators and bettors. High taxes can reduce payouts, while states with lower rates often offer better odds and promotions. For anyone serious about betting, understanding the nuances of sports betting taxation isn’t just a legal necessity, it’s a strategy to maximise winnings and minimise surprises during tax season.

How Sports Betting Taxes Work

When you win a bet, the IRS considers it taxable income. This means all winnings, regardless of amount, must be reported. On top of federal taxes, individual states impose their own tax rates on sports betting revenue. These rates are applied to operators, who may pass the cost onto bettors in the form of reduced payouts or fees.

Also read: Best Sportsbook bonuses and promotions you can claim

States With the Highest Sports Betting Taxes

Some states take a significant portion of sports betting revenue, impacting both operators and bettors:

• New York: Sportsbooks face a 51% tax on in-person bets, making it one of the highest rates in the country. Online bets are taxed slightly lower but still remain steep.
• Nevada: While famous for Las Vegas betting, Nevada imposes a 6.75% tax on sportsbook revenue, which is moderate but higher than many smaller states.
• New Jersey: Online and mobile sportsbooks are taxed at 13%, one of the highest for digital betting markets.

States With the Lowest Sports Betting Taxes

Some states keep taxation light to encourage legal betting and attract operators:

• Delaware: Sportsbooks here pay only 6.5% tax, making it a bettor-friendly state.
• Oregon: Sports betting is taxed at just 8% of revenue, one of the lowest rates in the US.
• Mississippi: Online and retail sportsbooks are taxed at 8%, keeping the market competitive.

Impact on Bettors

Higher state taxes often result in slightly lower odds or smaller payouts, as sportsbooks adjust their margins to cover tax costs. In states with lower taxation, operators may offer better odds or bonuses, indirectly benefiting bettors.

Tips for Bettors on Taxes

• Keep accurate records of all wins and losses for IRS reporting.
• Understand state-specific tax rules before betting online or in-person.
• Consider how state taxes might affect overall payouts when choosing where to place bets.

Understanding sports betting taxation is essential for serious bettors. While federal taxes apply universally, state rates vary significantly. By knowing which states charge the highest and lowest taxes, you can make informed decisions and potentially maximise your returns.

Also read: Online Sports Gambling vs. Traditional Bookmakers: Key Differences

FAQs

Do I pay taxes on sports betting winnings in every state?

You pay federal taxes on all winnings, but state taxes depend on where the sportsbook is licensed, not where you live.

Can I deduct my losses?

Yes, you can deduct losses up to the amount of your winnings, but you must keep detailed records.

Are online bets taxed differently from in-person bets?

Yes, some states apply different tax rates for online and in-person bets, so always check state-specific rules.

How do taxes affect sportsbook payouts?

Operators factor in state taxes into odds and promotions, so higher taxes can slightly reduce the effective payout for bettors.