Are you a person who is interested in sports? Do you engage in bets while watching your favorite sports? While most of us have not found luck while engaging in sports bets, there are people who have a very lucky and successful history of sports betting.
If you are one such person, are you aware of the effect these wins can have on your tax? Here are some of the most important things that you probably were unaware of, about sports betting tax.
With the United States Supreme Court ruling that makes sports betting legal in the entire country, more and more people are ready to try and find their luck in it. While some people end up losing a huge load of money, some people are known to build an entire fortune out of sports betting.
As winning a sports bet is also a form of income, the money you win is also treated the same way. This means that just like a person’s income, the money one wins through sports betting is also taxable.
It is true that the majority of the people who engage in sports betting are unaware of these regulations about the tax that is imposed on the money. So, if you are someone who engages in sports bets frequently, here is everything you need to know about the tax implications on them.
Federal Taxes On Sports Betting
According to the law in the United States, all income is taxable. After sports betting was ruled legal in the country by the Supreme Court, the event gained massive public popularity.
An amount won by a person through gambling or bets is considered income and they are taxable. The rule is not only applicable to professional gamblers but also to anyone who engages in best and wins an amount as the prize.
When a person wins a gambling, lottery, horse race, or any such sort of money, it is subject to income tax. The organization that pays the winning person will issue a Form W2-G, which is a form that is used to report any kind of gambling winning or any federal income tax withheld on any such winnings.
Also just because you won a sports bet or gambling does not mean that you are bound to pay taxes for the win. The IRS clearly lists out criteria for the payment of taxes.
As per the rule, if a person wins more than $600 from gambling or any kind of sports bet, only then you are liable to pay the taxes on the amount. There is no tax collected for wins below $600.
It should also be noted that if you get extremely lucky and win a huge amount that goes beyond the range of $5,000, then you are required to pay around 28% of the total amount to Uncle Sam.
Another factor that can affect the amount that one should pay as tax includes their individual income if they are single or the income of the household if they have a family.
While paying taxes on easy money such as gambling wins might seem to put you off, it also comes with a silver lining. Most people are unaware of the fact that gambling loose can be written off against wins.
For instance, if you are a person who has won around $1000 in gambling but lost almost $1200 in the process, there will be no tax imposed on your gambling winnings as you have lost more money than you have won.
If you face any difficulty in filing your tax regarding the gambling wins or the tax imposed on them, then it is advisable to consult a professional in the case.
State Tax On Sports Betting
While the federal tax on betting income is mandatory across the nation, there are also some states in the country that have established certain tax regulations on sports bets.
The rules and regulations that determine the tax rules in all states vary from each other. The gambling win from a state is applicable only in the jurisdictions where the winning is earned.
While states like California impose a tax on gambling wins in their jurisdiction, states like Nevada do not have any kind of legal strings attached to gambling wins. This means that if you are a person from California, who wins gambling in Nevada, then you are free of any charges as Nevada does not impose any on gambling or bet wins.
On the contrary, if you are a person living in Nevada and win a huge amount on your trip to New Your,m you are then bound to receive a tax bill as New York is one of the states in the United States that charges tax for gambling wins.
Where Does The Revenue Generated From Sports Bets Go?
As the policies regarding gambling and sports betting differ from state to state, there is o definite answer to this question. While some of the states utilize the money generated from these taxes for public good like improving the public education system or such sort, some states utilize this money on different fronts.
Also as the law regarding sports tax is different in almost all states, the amount generated by each state from sports tax is different. The state of Nevada is very liberal in their law regarding sp[orts bets and the money thus earned.
The state only charges around 6.75% tax on all of its gambling-related revenue. Some states like Colorado, Virginia, and Washington D.C. charges up to a 10% flat rate on their sports bet-related tax. One of the most notable states with a regulation on sports betting tax is NJew York.
It is one of the states in the country that brings in more sports betting revenue than any other state. New York has implemented an 8.5% on all revenue which is earned from any kind of retail establishment and 13% on all profits from online sources.