In 2018, sports betting became legal in many states. In addition to becoming legal, sports betting is easier than ever thanks to new sports betting apps that allow you to make sports bets in real-time. Not only is this a fun hobby for many, but it can also be quite lucrative in some cases. What some sports betting enthusiasts don't realize is that you are required to report any income from gambling and pay taxes. Here are three tips for paying your sports betting taxes:
1. You Need a Sports Betting Tax Consultation
Sports betting wins require special documentation, especially since they are separate from other forms of income like your full-time job or any freelance work you do on the side. This can quickly get complicated, so in order to ensure you've paid your taxes correctly, it's wise to work with a sports betting tax consultant. They'll be able to explain the recent changes so your tax returns are accurate.
2. All Forms of Sports Betting Winning Are Subject to Taxes
When you win money from sports betting, the company who ran the bet is required to report your winnings to the IRS via Form W2-G. This will come from the business entity that owns the app you use to gamble on sports games. Other types of sports betting, such as in-person betting on races or betting through a local bookie are also subject to taxes. In addition, other forms of gambling like casino winnings are subject to taxes as well.
It's important to know that you are required to report sports betting income on your taxes even if the company you won the money from forgets to report it to the IRS themselves.
3. You May Be Able to Deduct Losses
The good news is that in some cases, you are allowed to deduct your sports betting losses from your wins when filing your taxes. For example, if you won $7000, but lost $4000 on other bets, you may only be required to pay taxes on the $3000 total profit. This requires documentation of both your wins and losses and also requires itemizing your losses. This can quickly get tricky, so it's best to work with a tax professional.
As you can see, working with the right tax accountant or tax services company is important when you earn income from sports betting. Be sure to start with a consultation.