American Sports Betting and Tax Laws
Now the NFL is back Americans across the country will be enjoying placing bets on their favourite teams. However, very few people will have spent the time studying the tax consequences of gambling.
Not many people realise that all gambling winnings are included in taxable income due to Section 61; this means all winnings must be reported to the IRS. Anyone who isn’t a professional gambler must report their winnings on Line 21: Other Income.
The good news is that gambling losses are deductible. They come under “other miscellaneous itemised deductions” on Schedule A. However, if they don’t exceed the standard deduction ($12,200 this year) then gamblers don’t receive any tax benefits.
On the other hand gambling losses are not subject to the 2% of adjusted gross income floor.
The laws are different for professional gamblers, someone who peruses gambling full time as their main source of income. Professionals must report their income and losses on Schedule C; it is also possible to deduct other expenses essential to gambling activity.
The laws are far more complicated than explained here, it is advisable for anyone who regularly gambles to seek some professional advice or at least carry out further independent research.