As sports betting continues to gain traction across the United States, more Americans are placing wagers on their favorite teams and events—sometimes even turning a profit. But while the excitement of winning a bet is undeniable, many bettors overlook one crucial aspect of their newfound hobby: taxes. Whether you’re betting casually or as a serious side hustle, understanding the tax implications of sports betting is essential to avoid issues with the IRS.
Is Sports Betting Legal—and Taxable?
Since the Supreme Court struck down PASPA in 2018, sports betting has become legal in over 30 states. However, legality does not mean tax-free. According to the IRS, all gambling winnings—including sports betting—are fully taxable and must be reported as income on your federal tax return.
This includes all types of sports betting, such as traditional moneyline bets, parlays, futures, and even more niche markets like betting on mlb. Regardless of how you wager, if you win, Uncle Sam expects a cut.
What Counts as Gambling Income?
Gambling income includes, but is not limited to:
- Cash winnings
- Value of non-cash prizes (like cars, vacations, etc.)
- Online sportsbook winnings
- Lottery or raffle prizes
Even if you never receive a W-2G form, you are legally obligated to report all gambling income.
Tracking Wins and Losses
To stay compliant with U.S. tax laws, you must maintain an accurate log of your gambling activities. This record should include:
- Date and type of wager
- Amount won or lost
- Name and location of the sportsbook (if applicable)
- Betting slips, screenshots, or other proof of the transaction
Why keep this record? Because while you must report all your winnings, you can only deduct gambling losses if you itemize deductions on your tax return. Even then, losses cannot exceed the total amount of reported winnings.
Example: Winnings vs. Losses
| Month | Winnings | Losses |
|---|---|---|
| January | $1,200 | $900 |
| February | $800 | $1,000 |
| Total | $2,000 | $1,900 |
In this example, you would report $2,000 in gambling income. If you itemize, you may be able to deduct up to $1,900 in losses—reducing your taxable income.
How to File
Gambling winnings are reported on Form 1040 as “Other Income” on Schedule 1. If you received a W-2G, the amount should already be listed there. Losses, if deductible, go on Schedule A under “Other Itemized Deductions.”
State Tax Considerations
Some states have no income tax (e.g., Florida, Texas), while others have specific rules for gambling winnings. Check your state’s tax department website or consult a CPA familiar with local laws.
Tips for Staying Compliant
- Keep detailed records of every bet and outcome.
- Don’t assume online sportsbooks report everything for you—many do not.
- Use a tax professional if you’re a frequent or high-stakes bettor.
Conclusion
Winning at sports betting is thrilling—but it’s important to remember that with winnings come responsibilities. By understanding how gambling income is taxed and how to properly report it, you can enjoy your earnings without stress or legal trouble. And if you’re diving into new markets like betting on MLB, make sure you track everything closely and file accurately. Because nothing ruins a great betting streak like a letter from the IRS.