Yes, you owe federal income tax on sports betting winnings, and most states tax them too

The Internal Revenue Service treats sports betting winnings as taxable income. If you win money from a sportsbook, a casino, or any other betting operation, you must report it on your federal tax return. The amount you owe depends on how much you won and your overall income for the year. Most states also tax sports betting winnings separately, and some require the sportsbook itself to withhold a percentage before paying you.

The tax obligation exists whether you bet online, at a physical sportsbook, or with a bookie. It does not matter if you won once or bet regularly. The IRS does not distinguish between casual bettors and professionals — if you have winnings, they are taxable income.

Key Takeaways

  • Federal income tax applies to all sports betting winnings, and you must report them on your tax return even if the sportsbook does not send you a tax form.
  • Most states impose their own tax on sports betting winnings, ranging from about 8 percent to 37 percent depending on the state.
  • Sportsbooks are required to withhold taxes on large wins in many cases, but withholding is not the same as paying your full tax bill.
  • You can deduct sports betting losses against your winnings, but only if you itemize deductions and only up to the amount you won.
  • Keeping records of every bet — wins and losses — is essential for accurate reporting and for supporting a loss deduction if the IRS questions your return.

How the IRS treats sports betting income

The IRS classifies sports betting winnings as other income on Form 1040. You report the total amount you won during the year, not just the net profit after losses. This is different from how some people think about their betting — if you won $5,000 and lost $3,000, you still report $5,000 as income (though you can deduct the $3,000 in losses under certain conditions, explained below).

If your winnings are large enough, the sportsbook or casino may issue you a Form W-2G (Certain Gambling Winnings). The threshold varies by type of bet. For example, sportsbooks typically issue a W-2G for single bets of $300 or more with odds of at least 300 to 1. However, not all winnings trigger a W-2G — many do not. You are still required to report all winnings on your return, whether or not you receive a form.

Your winnings are added to your other income for the year, which can push you into a higher tax bracket. If you had a very large win, it could significantly increase your federal tax bill.

State taxes on sports betting winnings

Every state that allows legal sports betting taxes the winnings. The tax rate varies widely. Some states take a small percentage — around 8 to 10 percent — while others take much more. New York, for example, taxes sports betting winnings at 8.75 percent on top of federal tax. Illinois taxes them at 15 percent. Some states have rates as high as 37 percent.

In many cases, the sportsbook withholds the state tax automatically before paying you. If you bet $1,000 and won $500 in a state with a 15 percent tax, the sportsbook might pay you $425 and send $75 to the state. You do not have to pay that amount yourself — it comes out of your winnings.

However, withholding is not the same as your final tax bill. If you have losses in the same year, or if the withholding rate does not match your actual tax situation, you may owe more or receive a refund when you file your return. Some states also allow you to deduct losses, similar to federal rules.

Deducting losses against winnings

You can reduce your taxable sports betting income by deducting your losses, but there are strict rules. First, you can only deduct losses up to the amount of your winnings. If you won $2,000 and lost $3,000, you can deduct only $2,000 in losses, bringing your taxable income to zero. You cannot use the extra $1,000 in losses to offset other income.

Second, you must itemize deductions on your tax return to claim gambling losses. Most people take the standard deduction instead, which means they cannot deduct losses at all. You can only itemize if your total itemized deductions (including gambling losses, mortgage interest, charitable donations, and other may be able to access expenses) exceed the standard deduction for your filing status. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly.

Third, you need detailed records. The IRS requires you to keep a diary or log of your bets, including the date, the amount wagered, the amount won or lost, and the name of the sportsbook or casino. Without this documentation, the IRS may not allow your loss deduction if they audit your return.

What happens if you do not report winnings

Failing to report sports betting winnings is tax evasion. The IRS can assess penalties, interest, and in some cases criminal charges. If a sportsbook issued you a W-2G, the IRS receives a copy, and they will notice if your return does not match. Even if no W-2G was issued, the IRS can cross-reference sportsbook records with tax returns.

Penalties for underreporting income typically start at 20 percent of the unpaid tax. Interest accrues from the original due date of the return. If the IRS determines the underreporting was intentional, criminal penalties can include fines up to $250,000 and imprisonment up to five years.

The safest approach is to report all winnings, even small ones. If you are unsure how to report your specific situation, a tax professional can help you file correctly.

Record-keeping for sports betting

Keep a detailed record of every sports bet you place. Write down the date, the sportsbook name, the amount wagered, the bet details (which teams or players, the odds), and the result. If you won, record the amount. If you lost, record the loss. Use a spreadsheet, a notebook, or a dedicated app — the format does not matter as long as you can show the IRS what you did.

Also keep any tax forms the sportsbook sends you, including W-2Gs and 1099s. Save confirmation emails or screenshots of your bets and payouts. If you ever face an audit, this documentation is your proof that your reported numbers are accurate.

At the end of the year, total your wins and losses. Report the wins on your tax return. If you itemize deductions and your losses exceed your wins, you can deduct the wins amount (not the excess losses). This record-keeping takes time, but it protects you and makes tax filing much simpler.

Professional bettors versus casual bettors

The IRS treats casual bettors and professional bettors differently in one important way: professionals can deduct losses without itemizing. If the IRS considers you a professional gambler — meaning you bet regularly, keep detailed records, and treat it like a business — you can deduct all losses against all winnings, and the net result is your taxable income. You report this on Schedule C (business income) rather than as miscellaneous income.

However, the IRS is strict about what counts as professional gambling. You cannot straightforward declare yourself a professional. The IRS looks at factors like how much time you spend betting, whether you have a system or strategy, your track record of wins and losses, and whether you depend on betting for your livelihood. Most casual sports bettors do not meet this standard.

If you think you might may have access to as a professional bettor, consult a tax professional before filing. Claiming professional status incorrectly can trigger an audit.

Frequently Asked Questions

Do I have to report small wins?

Yes. The IRS requires you to report all gambling winnings, regardless of size. There is no minimum threshold for reporting. Even a $50 win is taxable income and should be reported on your return.

What if the sportsbook did not send me a tax form?

You still owe tax on the winnings. Tax forms like W-2G are issued only for certain large wins. The absence of a form does not mean the income is not taxable. You are responsible for reporting all winnings, whether or not you receive documentation from the sportsbook.

Can I deduct losses if I did not win anything that year?

No. Gambling losses can only be deducted up to the amount of gambling winnings. If you had no winnings, you cannot deduct losses. Losses cannot be used to offset other types of income like wages or investment gains.

Do I owe taxes on money I won using a free bet or bonus?

Yes. Winnings from free bets or promotional bonuses are taxable income just like any other win. The fact that you did not risk your own money on the initial bet does not change the tax treatment of the payout.

What if I bet in a state where sports betting is illegal?

You still owe federal income tax on any winnings. The IRS taxes income regardless of whether it came from a legal source. However, you may not be able to deduct losses from illegal betting, and you could face other legal consequences depending on your state's laws.