How to Claim Sports Betting on Taxes

The US government has finally dropped its controversial policy of prohibiting people from betting on sports events taking place in America. The new tax rule makes it possible for professional and recreational sports bettors to get their winnings treated as ordinary income, rather than as capital gains. The new regulations also apply to games played outside of the United States, which makes sporting events like the Super Bowl and the World Cup a bit more attractive to American gamblers.

The Treasury Department has mandated that all taxpayers must now report income gained from wagering on sporting events, regardless of whether they are professional or amateur. In addition to the new tax rules, the government has also provided guidance on how to properly report income from wagering, including examples and helpful tips on navigating this new tax territory.

Report The Income

Taxpayers who want to claim their wagering income on taxes must first figure out how to properly report it. The first step is to accurately track all of your income, including money earned from wagering. For those who use a professional tax preparer, they can help with properly reporting all of your income, including wagering income. They can also advise you on how to properly document your wagering activities so that you can file your taxes correctly.

Once you have filed your income tax return using the proper filing status and reported your wagering income, you can use the following formula to determine how much you should add to your tax rebate:

  • Your Adjusted Gross Income (line 19 on your personal income tax return)
  • ×
  • 1.03
  • This is to determine your tax rebate. (Your adjusted gross income x 1.03)

Where Can I Trade?

The next step is to determine if you can access a sportsbook, or whether you will have to travel to another country to place wagers. The government has provided a list of approved sportsbooks for American gamblers, which can be found here. If your bank does not have a relationship with any of these bookmakers, you will have to choose between paying tax on your winnings or placing bets in a foreign environment, where you will be subject to different rules and regulations.

Those who access sports betting sites from outside the United States and play for real money should also report the activity. All online wagering activities should be reported as gambling receipts on your taxes.

When Should I Report My Gains?

Another important consideration is when you should report your wagering gains. You have to ensure that you report these winnings within 48 hours of the conclusion of each game, whether you predict the outcome or not. Otherwise, you might get a nasty surprise when the IRS comes knocking on your door. They have ways of finding out if you have omitted any winnings, and they will take a close look at your finances, so be sure that you declare all of your winnings.

It’s also a good idea to report your wagering gains in the same year that you actually win money from betting. That way you can ensure that your winnings are properly attributed to you and you’ll have a clear picture of your finances for the whole year.

While it is great to see the US government removing its restrictions on wagering, it is still a good idea for taxpayers to follow the proper reporting procedures so that they do not get themselves in too much trouble. Taxpayers who want to take advantage of the new tax law should engage an expert tax preparer so that they can properly file their taxes and ensure that they are properly credited for their wagering activities.