Spread betting has become one of the most popular sports betting alternatives in the United States in recent years. Thanks to newly available tax laws in many states, sports books and online casinos have shifted their focus to this lucrative market segment.
Does financial spread betting gain earn a gambling excise tax in the U.S.? We explore the tax implications of this growing segment of the sports betting market in this article.
How Does Spread Betting Work?
If you’re not familiar, sports betting (and fantasy sports) operates on a basis similar to traditional poker games. You make a wager on the outcome of a sporting event or championship, and there are four possible outcomes:
- The winning team will cover the spread,
- The winning team will fall short by at least a certain amount,
- The losing team will cover the spread,
- The losing team will fall short by at least a certain amount.
In a traditional poker game, all players sit at the table and each one contributes a share of the pot. In a sports betting game, on the other hand, only one player (the “bookmaker”) takes on the role of pot controller, making all the decisions about who wins and who loses based on the outcome of the game. The share of the pot that each player contributes is based on the amount wagered on their behalf by the bookmaker.
State And Federal Taxes On Spread Betting
As in traditional poker games, there are both state and federal taxes that apply to sports betting, and they can all be pretty complicated. Fortunately, the Internal Revenue Service (IRS) has made it easy for individuals to file their taxes on forms like the gambling form, the W-4G. That’s what you need to do if you decide to take advantage of the spread betting opportunities in the United States.
The IRS has said that it does not consider gambling (and therefore, sports betting) to be a hobby, but a way of life. As a result, anyone participating in sports betting is subject to federal and state income taxes just like those who participate in other forms of gambling.
Who Pays When You Lose?
When you bet on sports, there is a chance that you will lose money, sometimes a LOT of money. Just like in any other form of gambling, when you lose you owe the sports book or casino (or your bank, if you use credit cards) the amount you wagered plus additional taxes and fees.
In most cases, the casino (or sports book) will charge you a commission per wager. In addition, you will be charged a “gratuity” if, for example, a hotel guest loses a bet for you and the commission is not enough to make up the total amount owed by the guest. So, when you lose money playing sports, you will be responsible for paying various fees and taxes.
The bottom line is that if you’re not prepared to lose, then you shouldn’t be playing. Remember, though, that while most states and federal governments frown on illegal gambling, doing so doesn’t necessarily mean that you’ll be charged with a crime. But, the odds are still against you.
On the bright side, if you do manage to win, you will not be charged with a crime, and you can look forward to big paydays. In most cases, the amount you win will be taxed at a flat rate of 10 percent, but you can also expect to see some tax deductions if you’re a lucky winner.
Where Can I Play?
If you decide to take the plunge and explore the world of spread betting, you will find a variety of options in your area. Just make sure that the bookmaker you choose is licensed in your state and offers an area where you can find all the games you could want. It is also essential that the site you choose is secure and offers a good level of customer service.
If you’re looking for online casinos, make sure that you choose a safe and reliable site with a good reputation and award-winning customer service. Play responsibly and ensure that you’re aware of the relevant state and federal laws that pertain to where you live and where you choose to play.