Can the cost of a sports bet or wager be categorized as an itemized "loss" even if that bet eventually makes you a profit?

[mx31619]

In NJ, where you can bet on the DraftKings Sportbook App - let's say you make a "Sportsbook Bet" of $4,000 on a team to win and this eventually resulted in a "Sportsbook Payout" of $4,500 (a slim net profit of $500). Would my "winnings" be $4,500, and if so, can I use the cost of the bet as an itemized deduction of $4,000?

If the bet/wager itself does not count as gambling loss, then you would be taxed much more than you profited on that bet. If the tax rate on winnings is roughly 25%, you would be taxed over $1,000 for profiting only $500.

As a side note - DraftKing's “full transaction history” excel document for Sportsbook has individual rows for each bet (debit) and individual rows for each payout (credit) with separate transaction IDs. Basically, you cannot tell which bet ended in a loss or ended in a win from their transaction document.

[Anita01 · Accepted solution]

Yes, you can enter the amount spent as a loss, but only up to the amount of the winnings.  After you enter the winnings, you'll be asked right away to enter the losses.  You only receive a deduction for the losses if you have enough in itemized deductions in total to be able to itemize.  Either way, the winnings count as income.

[mx31619]

Alternatively, can I report the sports gambling winnings as the winnings REDUCED by the winning wagers? (Doesn't a W-2G reduce the wager?) In the case above, can I report $500 as the amount of winnings for the year? If this alternate way is valid, I would report no losses as there would be no losing bets.