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Betting Taxes by State: Our Guide

Heather Williams

Whether it's casino or sports, Heather knows it all!

Publish Date: 08/02/2023

Fact checked by: Graham Stevans

While sports betting should primarily be about having fun, many fans will see their wagers come in and make them a few bucks. If that’s the case, you’ll need to wrap your head around sports gambling tax.

While tax on sports gambling winnings might not be the most exciting subject, it’s a necessary one to understand – and one which is multi-faceted. That’s why we’ve crafted this guide to provide you with the key information needed to tackle your taxes. So you can focus on making the smartest bets and, hopefully, enjoying your winnings.

Table of Contents

How sportsbook taxes work - Understanding sports gambling tax
The practicalities of tax on sports gambling winnings
Current state-by-state gambling taxes in the USA
How to approach state sportsbook taxes
Conclusion: Sportsbook taxes are manageable with a little due diligence
Sports gambling tax FAQ

How sportsbook taxes work - Understanding sports gambling tax

While there are many different facets to sportsbook taxes, the answer to the basic question remains simple. Do you have to pay taxes on online sports betting? Yes, you do. Sports betting winnings over $600 come with a 24% withholding rate tax.

This is because all income is taxable and your winnings from gambling are considered income on a federal level. It doesn’t matter whether your gambling winnings are from lotteries, raffles, horse racing, casinos or sportsbooks, this principle remains the same. It also doesn’t make a difference which sport you’re betting on – any market relevant to our sports betting guide is taxable. Even fantasy league betting is indeed considered taxable income.

While there are potential deductibles (which we’ll get into shortly), the fact is that there’s no way of getting around paying online sportsbook taxes if you win money from betting on sports of any kind.

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The practicalities of tax on sports gambling winnings

First things first, real money sportsbooks are only legal in the following states:

Oregon
Nevada
Arizona
Montana
Wyoming
Colorado
Kansas
Iowa
Illinois
Michigan
Indiana
Ohio
Pennsylvania
New York
New Hampshire
Rhode Island
Connecticut
New Jersey
Maryland
Virginia
West Virginia
Tennessee
Mississippi
Louisiana

So, if you’re outside of these states, you shouldn’t be worrying about online sportsbook taxes because you shouldn’t be gambling at all. There are sweepstakes gaming options, which are more broadly legal. However, where real cash prizes are concerned, they largely stick to casino gaming. Nonetheless, if you were to find a sweepstakes sportsbook with cash prizes, you’d need to pay tax on that too.

The way all sportsbook taxes work is fairly simple: if you win more than $600, then whoever you’re betting with should send both you and the IRS a tax form. If you enjoy a net profit of more than $600, the sportsbook would also need to send you and the IRS form 1099-MISC. This may be 1099-K if you’re using the likes of PayPal or CashApp. That’s how you report and pay your taxes, and you’ll still need to report them if, for whatever reason, those forms aren’t sent.

Deducing losses

The good news is that it’s possible to deduct your gambling losses. In other words, if you had $20,000 in gambling winnings and lost $6,000, you’d be able to deduct the latter.

However, you wouldn’t be able to deduct losses if your losses were greater than your gains.

Current state-by-state gambling taxes in the USA

Along with the federal tax rate, there are state taxes to consider. Essentially, each state government has the right to tax any income on gambling as well, regardless of which betting sites USA you choose. Not only do you have to pay taxes on online sports betting, but often, you’ll have to pay them twice.

This can be complicated, as each state is unique. It’s also important to note that the situation is subject to change. Not only can individual tax decisions by a state change, but it also looks likely that in the near future, new states will join the collection of legal options. They will also make their own decision on taxes.

In terms of what’s possible, tax rates can range anywhere from 6.75% in the case of Nevada to 51% for New York. In other words, your state online sportsbook taxes can have an enormous impact on your returns.

Your income, tax bracket, deductibles and marital status can also have an impact.

How to approach state sportsbook taxes

The varied and multi-faceted nature of state taxes may make them seem tricky, but in reality, it’s as easy as three simple steps.

Research the tax rate and practicalities

Look up, from the most reliable sources you can, what your current state tax rate on sports betting winnings is. Also make sure you check any other factors which could have an impact, such as your tax bracket and deductibles, to work out how much you owe.

Do note that there may be multiple tax rates suggested during your research. This is because many sources appear to get confused between what the operator is being taxed, other gambling tax rates, and the tax on an individual’s winnings. As such, be sure you have the right sports gambling tax rate.

Put that money aside

Ensure you have that money ready to be paid with your taxes and do so at the opportune time.

Consider professional help

We can’t give you individual tax or financial advice. If you’re not sure about anything related to your taxes – whether that be state tax on sports gambling winnings or anything else – get advice from a professional account for clarity and peace of mind.

Conclusion: Sportsbook taxes are manageable with a little due diligence

There’s little doubt that due to the addition of individual state taxes, sports gambling tax in the US can be a little more complicated than some other countries. However, by keeping on top of your finances and researching what’s required in your jurisdiction, you can keep your sports betting tax stress-free and may even be able to take advantage of some deductibles.

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Sports gambling tax FAQ

💰Do I need to pay taxes on my sportsbook winnings?

Where else would we begin our look into how US taxes work with sportsbook winnings than by answering the central question itself? Which is whether or not this is considered taxable income. We’ll be making that clear as part of our in-depth guide, alongside all the key details on what types of betting specifically can be taxed and how.

❓Are there any state specific taxes on sportsbook winnings I need to be aware of?

In many instances, there are two key kinds of tax an American should be aware of. Tax on a federal level and tax on a state level. However, it’s not clear to many whether the latter is a necessary consideration when it comes to sportsbooks winnings. Our look at this very subject will ensure you are confident in whether you need to take any additional state taxes into account.

💵Can I deduct gambling losses from my taxable income?

Much of our analysis of US taxes for sports betting winnings is largely concerned with what you need to be aware of in terms of taxable incomes. However, we’ll also be paying attention to the other side of that coin, which is whether there are any deductibles you could use to save money.