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As an Enrolled Agent (EA), I am a tax professional who has earned the privilege of representing taxpayers before the Internal Revenue Service (IRS). Unlike other tax preparers, EAs specialize in tax matters and have demonstrated their expertise by passing a rigorous three-part exam administered by the IRS.
Sports Betting and Taxes: What You Need to Know
With legalized sports betting expanding across the U.S., more people are placing wagers—and winning. But whether you’re a weekend warrior or a seasoned bettor, your winnings are taxable. Here’s how to stay compliant and make the most of your deductions.
All Winnings Are Taxable
The IRS considers all gambling winnings—including sports bets—as taxable income. This applies to:
• Online sportsbooks
• Casino sportsbooks
• Fantasy sports platforms
• Informal bets with friends
Even if you don’t receive a Form W-2G, you’re still required to report your winnings on your federal tax return. Learn more about how to report income on your Form 1040.
Can You Deduct Your Losses?
Yes—but only if you itemize your deductions. Here’s how it works:
• You can deduct losses up to the amount of your reported winnings.
• You must use Schedule A to itemize.
• You need detailed records of each wager: dates, amounts, and outcomes.
So if you won $8,000 and lost $10,000, you can only deduct $8,000. The remaining $2,000 in losses won’t reduce your taxable income.
Heads-Up: Phantom Tax Starts in 2026
Beginning in tax year 2026, a new rule will cap gambling loss deductions at 90% of winnings. That means:
• If you win and lose the same amount ($20,000), you’ll still owe taxes on $2,000 of “phantom income.”
• This could bump some taxpayers into a higher bracket—even if they broke even.
Recordkeeping Is Essential
To protect yourself in case of an audit:
• Keep a gambling diary with dates, locations, and amounts wagered.
• Save receipts, betting slips, and online account statements.
• Track both wins and losses meticulously.
Need help organizing your records? Our team at Nexus Taxes can guide you through it.
Professional Gamblers:
Different Rules Apply
If sports betting is your profession, you may report winnings and losses as business income on Schedule C. You can also deduct related expenses like travel, entry fees, and subscriptions—but you’ll be subject to self-employment tax.
Final Thoughts
Sports betting can be exciting—but the tax consequences are real. Whether you’re riding a lucky streak or just dabbling, make sure your tax strategy is as sharp as your betting strategy.
Need help navigating your gambling income? Contact Nexus Taxes today—we’ll help you stay compliant and keep more of your winnings.
