It is March Madness once again and you are probably placing bets on some or all the games. However, most people don’t know that they need to pay taxes on March Madness winnings or for all their gambling activities for that matter.
As gambling becomes legal across the nation, people should consider the taxes they need to pay for their winnings. According to gambling archives, March Madness is the biggest sports betting event of the year. In addition, experts expect Americans to bet a total of $8.5 billion.
However, most people don’t declare their March Madness winnings for tax declarations. According to tax officials, your winning is a form of income. Also, it is taxable. Although the Supreme Court allowed states to legalize sports betting, its ruling hasn’t changed federal tax rules on gambling.
Winnings on sports wagers are fully taxable. In fact, you should report them on your federal tax return. Gambling income includes money from raffles, casinos, horse races, and lotteries. Aside from cash winnings, it also includes the fair value of prizes such as vacations or cars.
The sportsbook paying out the prize should provide a W-2G form for large winnings. You can be a subject to federal tax withholding on large amounts and pay estimated taxes. However, you can deduct gambling expenses for itemized deductions.
Keep in mind that the deductions can’t exceed the gambling winnings you declare. For instance, you can claim losses equal to the number of winnings. For deductions, you should keep records including statements, tickets, or receipts.
Another thing to remember is that you can’t reduce your winnings with your losses and just report the difference. Instead, you need to report the full amount of your winnings as income and claim losses as a deduction.
According to betting software experts, you need to maintain records of your sports betting activities during March Madness if you want to deduct losses. Your deductible expenses can include travel expenses going to and from the casino.