How does the stake factor into sports betting winnings

[Skives19]

How does my sports betting stake factor into filing my sports bad betting winnings?

let’s say I bet $100 to win $50 and win my bet. The online sportsbook pays me $150. So I won $50 and got my $100 bet back. 

how do I report these winnings to the IRS? Is it $50 in winnings or $150? If it’s $150 in winnings can the original stake of $100 be deducted on my taxes?

[TomK100]

You would report the $50 as winnings.  You should receive a W-2G from the gaming business that you gambled with.

Entering Gambling Winnings (with or without a W-2G) into TurboTax: 

1. Open your return.
2. Search for w2g in the search box (upper-right corner).
3. Click on Jump to w2g.
4. Enter any winnings.
5. Continue with the interview questions.
6. You eventually end up on a screen where you can enter your losses.  Just remember that you can only deduct losses up to the limit of your winnings.

For example: If you lose $100, but only win $50, then you can only deduct $50.

[Skives19]

I was just told by a turbo tax expert in chat that in this scenario I would need to claim all $150 as winnings. 

[GeorgeDenseff]

Report all of your winnings.  You can claim a loss up to the amount of money that you gambled.  If you bet $50 and win $150, then your winnings are $150 and your loss is $50.

[Skives19]

So I can deduct the cost of a winning wager but only if I itemize?

[Vanessa A]

Correct, you can only deduct the cost of the winning wager if you itemize.

[Skives19]

Why is the wager considered a gambling loss? I have had multiple people say it both ways. How do I know which is right?

[Vanessa A]

The wager is an expense. If you lose it is a loss.  Either way, they are both deducted the same way and grouped together. 

[SundayInSalem]

@TomK100  is correct. If you bet $100 to win $50, only your $50 in winnings are taxable (assuming you only made one bet). Your Form W-2G will show $50 in “Reportable winnings” in Box 1. The $100 is your money.

The other answers involve situations where there were multiple bets with some bets resulting in a loss.

The IRS only allows you to deduct gambling losses up to the extent of your winnings. However, in answer to your question about how your stake factors into your winnings, the Tax Court held in Shollenberger v Commissioner T.C. Memo. 2009-306 (2009) that you can report as gambling winnings the difference between what you started and ended with if you keep records for each session.

In Shollenberger the petitioners entered a casino with $500 and left with $1,600 (an $1,100 taxable gain). However, during their stay they actually won $2,000 and lost $400. The IRS said they should have reported $2,000 in gambling winnings. The court held $1,100 was taxable.

The court said: “Drawing an analogy to the recovery of a capital investment, this Court has held that a casual gambler's gross income from a wagering transaction should be calculated by subtracting the bets placed to produce the winnings, not as a deduction in calculating adjusted gross income or taxable income but as a preliminary computation in determining gross income.”

This must be done for each separate session and you must keep records.

For more discussion see: Gambling Winnings for 2018

[russell_gerhard1]

In this example wouldn't they be winning $2000 and losing *$900 for a taxable gain of $1,100?

Additionally, I have a question with regard to the notion of "session" as it relates to sports betting: if I place a $2,500 wager and lose it on Monday, and then I place a $1,000 wager on Friday and win $5,000, should I report the $5,000 gross from my Friday "session," or should I report the $2,500 net income? Follow up: what if these wagers were placed on different sportsbooks? Thank you in advance!

[DianeW777]

It depends and it's ambiguous as many tax rules can be. Each session would be each wager during the specific time frame and of the same type.

Keep in mind that the IRS will not follow each separate court case, but it's possible to site a court case if you are questioned to see if the IRS believes and agrees that it meets your similar criteria.

• 'This Court has also recognized the practical difficulties of tracking the basis of each wager individually in a session of like play.' (From the court case referenced.)

To reiterate the IRS tax rule for gambling winnings: 

Gambling Winnings

A payer is required to issue you a Form W-2G if you receive certain gambling winnings or have any gambling winnings subject to federal income tax withholding. You must report all gambling winnings as "Other Income" on your tax return including winnings that aren't reported on a form. .

Gambling Losses

You may deduct gambling losses only if you itemize your deductions and kept a record of your winnings and losses. The amount of losses you deduct can't be more than the amount of gambling income you reported on your return. Claim your gambling losses up to the amount of winnings, as "Other Itemized Deductions."

@russell_gerhard1

[russell_gerhard1]

That's so strange that the IRS taxes people in this manner; it seems a little bogus to call winnings income but then say that losses are a personal expense. But it is what it is! Thanks for the advice.

[SundayInSalem]

Yes  the Tax Court held the taxable amount would be $1,100 @russell_gerhard1.

Other rulings have defined a "session" as in and out, so you would not be able to combine Monday and Friday. In your example, you would have a $2,500 loss and a $4,000 gain ($5,000-$1,000). You would report $4,000 in gambling winnings and $2,500 in gambling losses.