Sports Betting Promotion Taxes

[cp44444]

How are sports betting promotions, like free bets and deposit matches, taxed?

If I bet $100 and win $300, I know I claim $300 as a win and offset the $100 wager as a loss.

Sportsbooks are offering many and varied promos that complicate the basic model presented above. I’m looking for any insight. Here are a few examples of kinds of promos I’ve run into:

1) Simple deposit match. For instance, deposit up to $1000 and be matched in your account 100% up to that amount. Is that taxable? It isn’t a “winning” per se.

2) $100 free bet promo, win $200 (claim $200 as win, no loss offset?)

3) $100 free bet promo, lose (nothing?)

4) $500 risk free bet offered. Lose first. Free bet credited for $500. Win second bet for $400. Net -$100.

Thanks!

CC

[hbl3973]

cp44444,

Unless you are a professional gambler, gambling losses are only deductible as an itemized deduction on Schedule A and only up to the amount of gambling wins.  See https://www.irs.gov/taxtopics/tc419  for a discussion on that topic.  So you don't directly "offset your losses."  (If you are a professional gambler, I would assume you already know what you are doing and have a competent tax advisor.)

Assuming you are a regular cash basis taxpayer, you would report only the actual cash/check/prize monies received for your bets.  Unless you could withdraw the deposit match or the free bet allowance without gambling, that is not income.  Think of it as either a discount in the price of playing or an adjustment to the payoff of a winning bet.

Bottom line: Just report the total winnings, typically as W2-G gambling income, and use the actual money you laid down for gambling as your outlay for Schedule A deductions,  capped at whatever your total winnings were. 

Most people find that their standard deduction exceeds their itemized deductions these days and often by quite a lot.  So it is quite possible, even likely, that the gambling loss deduction on Schedule A will give you no tax benefit.  However, you alone know your actual situation and level of gambling activity.  In any event TurboTax will calculated your itemized deduction total and compare it to your standard deduction to give you the one that minimizes your taxes.  See Schedule A Instructions for a complete list of itemized deductions you can include alongside gambling losses.

[cp44444]

2nd paragraph exactly what I needed. Thank you!

[hbl3973]

Happy to be of service when I can.  I do volunteer free tax preparation 6 days a week right now with AARP's Tax-Aide and the IRS VITA program.

[cp44444]

@hbl3973 One other question on the topic while I have you:

Would it be best practice to claim a $100 bet placed on 12/31 as a loss for tax year 2022 on Schedule A, then claim $200 in winnings on the same bet for tax year 2023? Is that the correct approach? Or push it all to one year or the other?

CC

[hbl3973]

cp44444,

Interesting though.  As the cost of a wager counts as a gambling loss and the proceeds of a winning wager as gambling income, I would go by the cash basis taxpayer rule and attribute each to the actual date that the bet was placed and the actual date that the bet was won and available to collect respectively.

[haw8195]

So any wager regardless of outcome is considered gambling loss if itemizing? 

[Vanessa A]

Correct.  But you can ONLY claim losses, even when itemizing, up to total winnings.  This means you can use all the losses to offset your winnings, but you cannot use your losses to offset other income. 

[haw8195]

Great thanks so much!