Everything You Should Know About Betting and Taxes in 2024
Thursday, October 10, 2024
Betting in the United States has evolved from what was once the domain of underground books and highly regulated casinos to front and center, live after the Supreme Court overturned a federal ban on sports wagering in 2018. Currently, in 2024, more than 30 states have legalized sports betting and an uptick in online platforms has made gambling easier than it's ever been. Unfortunately, there is one very important component accompanying this uptick in betting activity that most bettors probably aren't giving much afterthought: taxes.
With continued changes putting a new face on the tax landscape in 2024, what follows is a more detailed guide regarding what one should know about betting and taxes if they are a United States taxpayer.
Reporting Your Winnings
The Internal Revenue Service regards gambling winnings as fully taxable and needs to be reported in your federal income tax return. Examples of such are lotteries, sports betting, casinos, horse races, or even game shows. All forms of betting, whether it would be legal or illegal, will then be engulfed in these rules.
These regulations also apply to winnings that are made on online platforms that offer a variety of gambling entertainment and betting platforms. Some of those platforms include platforms like Aviator which provide all the above-mentioned betting opportunities and more.
What qualifies as gambling winnings?
Winnings from betting include cash prizes and also the fair market value of prizes won other than cash, such as cars and trips. For example, if you win $5,000 on a bet during the Super Bowl or hit the jackpot on a slot machine, you need to report that amount to the IRS.
Sometimes, a paying institution will issue you a Form W2G to show your gambling winnings. This is usually issued if the winnings are above threshold amounts: $600 for horse racing, $1,200 for slot machines or bingo, and $1,500 for poker tournaments. If the winnings are more than $5,000, the paying institution must withhold 24% of your wins for federal taxes.
Filing Without a W-2G
Even if you don't get a W-2G, then, you must report it. Imagine it: you have been lucky enough to win $200 on a sports bet, or at a low-stakes poker game. Those too are reportable. In the case of smaller percentages, IRS may not be automatically informed but the taxpayer is obliged to keep such a record and fill it in properly.
Tracking Your Gambling Losses
One bright spot for frequent gamblers is that gambling losses are deductible, but only if you itemize your deductions on Schedule A of your federal return. Here's what you need to know:
You are only allowed to deduct losses to the extent of wins from gambling: Using the same example above, if you win $2,000 during the year but lose $3,000, you can only write off $2,000 worth of losses. The remaining $1,000 in losses cannot be written off.
You must document them: To claim losses as deductions, you should have a record of each bet placed. This means date, place, kind of bet and amount of winnings or loss. The records could come in the form of a ticket, receipt, or even statements from online accounts.
State Taxes on Gambling Winnings
In addition to federal taxes, numerous states tax gambling winnings. Rules vary by state—some follow federal rules, while others set lower limits or their own tax rates. New Jersey, for example, has a 3 per cent state tax on such winnings, while Pennsylvania slaps on a flat 3.07 per cent rate. Check your state for its regulations to stay in compliance.
Changes in 2024: What Bettors Need to Know
For 2024, taxpayers can expect a few key updates that may change how they report their gambling activity:
More Widespread Reporting Requirements:
As sports wagering and betting online continue to grow, more and more data is required to be reported to the IRS by the platforms. This may mean online betting platforms in particular are issuing W-2G forms this year more so than in years past, making it a little bit harder to fly under the radar with untaxed winnings. The IRS also ramps up its use of technology to track gambling winnings which could result in more enforcement.
Stricter Standards for Record Keeping: Of course, with more and more bettors on mobile apps and online platforms, the IRS has focused on better and more complete records. Whereas the platforms do indeed provide an in-depth transaction history, it is the taxpayers' responsibility to keep those records and report them accurately.
Practical Tips for Bettors in 2024
If you gamble on a regular basis, here are a couple of ways to make tax season a whole lot less painful for you and keep you having fun:
Track every single wager: Take all of the wagering baskets into account, all cards dealt, and all roulette wheels rotated in every sports betting, online poker tournament, esports bet or casino activity must be reflected. Records will need to be made either by creating a master document, perhaps a spreadsheet, or with applications or account statements. Starting early, as soon as you place a wager will make this tracking a lot easier rather than waiting to collate everything at the end. This is not only impractical but can also be extremely stressful.
Claim deductions correctly: Do not underestimate yourself to take all your losses by way of itemizing it, where you can if necessary. However, amounts spent are generally allowable only in proportion to the winnings derived from friable materials.
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