To give an example, lets say your net win / loss over the course of a year was $2,000. Those winnings came from a combination of sports bets and table games (let's say primarily blackjack). You withdrawal $1,000 and leave the other $1,000. Is $2,000 still taxable or is only $1,000 taxable? Also, I would just like to confirm that winnings are not taxed at an individual wager level. As in you win a $100 hand of blackjack and then lose it the next hand. You don't owe taxes on the $100 won, correct, because the net win / loss is $0?
Disclaimer: I am not a tax professional and am not qualified to give tax advice.
Here are a few resources I've found helpful in explaining the topic. I was especially interested in the definition of a gambling session and course-of-play wagering.
Michigan Income Tax - Treatment of Gambling Gains, Losses, and Expenses
Taxation of Recreational Gamblers: An Overview of How to Report Wagering Gains and Losses
Gambling Taxes: US Income Tax
Nope, it does not work that way. You enter your total winnings for the year as other income on a federal tax return. You enter your total gambling losses, up to the amount of your winnings, as a Miscellaneous itemized deduction on Schedule A.
Gambling losses can only be deducted up to the amount of the gambling winnings. Gambling winnings are reported on Form 1040 Schedule 1 on Line 8 as Other Income. Gambling Losses are reported on Form 1040 Schedule A as a Miscellaneous itemized deduction. Gambling losses are not a one-for-one reduction in winnings. Your total itemized deductions reported on Form 1040 Schedule A must be greater than the standard deduction for your filing status to have any tax benefit.
To enter, edit or delete Gambling Winnings and Losses -
- Click on Federal Taxes (Personal using Home and Business)
- Click on Wages and Income (Personal Income using Home and Business)
- Click on I'll choose what I work on (if shown)
- Scroll down to Less Common Income
- On Gambling Winnings, click the start or update button
Or enter w2g in the Search box in the upper right of the program screen. Click on Jump to w2g
This is where it gets tricky though. If you go to the casino and walk out with a $2,500 slot winning and go back to the casino and lose $2,500 the next time, you still owe taxes on the first $2,500 and can include the losses if you itemize. I get that.
For an online casino though, if you play 10,000 hands of blackjack at $1 per wager, your total stakes wagered is $10,000. Now lets say your total bet winnings from those 10,000 hands was $10,100 (never more won than $5 per hand lets say). So your net win / loss is $100. You wouldn't owe taxes on $10,100 because that's what you won over 10,000 hands, correct? You'd be subject to thousands of dollars in tax simply for playing a lot of small hands. The taxable winnings seems like $100 in this example.
What you are describing would be true if you were a professional gambler reporting income and expenses on a Schedule C. You would have $10,100 of income and $10,000 of expenses for a net income of $100.
However, if not a professional gambler you report the $10,100 of winnings as ordinary income on the Form 1040 and the $10,000 of losses as an itemized deduction on Schedule A.
I just heard back from the online sportsbook / casino and this is what they've stated...
Below is a breakdown of how sportsbook winnings are taxed.
- We will issue a W-2G form each time a player has a payout of $600 or more (no reduction for the wagered amount) and a return which is 300X the amount wagered.
- We will withhold federal income tax from the winnings if the winnings minus the wager exceed $5,000 and the winnings are at least 300 times the wager.
- We will report prizes and awards that are not for services performed and are not a result of a wager whose aggregate amount is $600 or greater.
I then asked if the amount reported on the 1099-Misc is the total win / loss for the tax reporting year (assuming no individual payout meets the requirements for a W-2G)? So the $100 in the example above, not the $10,100. To which they replied that is correct.
@DoninGA If you walk into a casino, play live blackjack, and walk out with $1,000 more than you walked in with, $1,000 would be taxable. There's no way to tell what the total win of each individual hand added together is, or the total cumulative loss of individual hands. All you know is you have $1,000 more than you did previously. Just because online casinos keep logs of every wager, hand, roll, spin, etc. doesn't seem like it changes the taxable situation to me. One could theorhetically "win" a million dollars over tens of thousands of hands of blackjack throughout a year but only net let's say that $1,000 example. They'd be responsible for a quarter million in taxes? Seems more likely they'd be responsible for roughly $250 in taxes on the $1,000 they netted.
I think this is where we're still missing each other though and where the confusion lies. Sportsbook and table games are excluded from the W-2G requirements (https://blog.turbotax.intuit.com/income-and-investments/how-are-gambling-winnings-taxed-8891/). You're responsible for reporting your own income, which I do believe - and where my question lies, is on the net income of the taxable year. Not a sum of every individual bet, hand, roll, spin as income and every individual bet, hand, roll, spin as a loss deduction. Simply the net win / loss as other income. This was confirmed by the casino as well.
For sports betting, your gambling income is the total of all the wins. Let's say you put $100 in an account and play $10 games. You win 20 bets and lose 20 bets. Also assume there is no juice, so your balance is $100 after those bets. You have $200 in gambling income. If you don't itemize then you can't deduct anything. This is where the TCJA raising of the standard deduction, SALT 10K limit, etc, did not help you. Even though you broke even, this is what the tax law is. Casino games may be treated different, but I don't know.
Ok, this is what I was looking for.
For online fantasy sports (and presumably online sportsbooks and online casinos), net profits are to be reported as additional income.
Net profits can be calculated as (Withdrawals + Year End Account Balance) - (Deposits – Beginning Year Account Balance) = net profits.
If net profits exceed $600 in a tax year, a 1099-Misc will be generated. If any individual qualifying win triggers a W-2G, those will be generated as needed.
This is also in alignment with what the online casino confirmed for me.
Dude, I'm in the same boat as you and I wish this were true with sports betting, but it's not. This article applies to fantasy sports. The chances of you getting audited are probably slim, but the IRS will treat sports betting like I posted earlier.
It seems reasonable to me that in person sports bets are treated differently than online sports bets. In person each wager is an individual transaction, like a keno slip or lottery ticket - both of which you’d tally individual wins and losses. Online operates with a revolving account where sportsbook and casino wins and losses are all intermingled for a net profit (or loss), like fantasy sports. I’m trying to get further confirmation, preferably from a tax professional familiar with the latest online gambling regulations. Like I said, the casino already confirmed it is net profits that get reported for tax purposes, not the sum of every individual wager ever. I would like to take that as fact, but I understand they are not the IRS. I would just hope that if they are confirming tax information that it most certainly better be accurate.
I found this as well that specifically calls out online sports betting.
See the ‘Winnings From Online Sports Sites Are Taxable’ section.