Sports Betting Tax Withholding: When Sportsbooks Take Taxes Out

You hit a big parlay, open your sportsbook account to celebrate, and notice the payout is smaller than expected. The sportsbook withheld a chunk of your winnings for taxes before the money ever reached your balance. Sports betting tax withholding catches many bettors off guard, but it follows clear federal rules that every bettor should understand.

This guide explains exactly when sportsbooks are required to withhold taxes, how the 24% federal withholding rate works, what triggers backup withholding, and whether you can get withheld money back at tax time. For a broader overview of your tax obligations as a bettor, see our complete sports betting taxes guide.

Important: This article is for general educational purposes only and does not constitute tax, legal, or financial advice. Tax laws change frequently, and individual circumstances vary. Always consult a qualified tax professional for advice specific to your situation.

What is sports betting tax withholding?

Tax withholding is when a sportsbook deducts federal income tax from your winnings before paying you. Instead of receiving your full payout, you get the net amount after the sportsbook sends the withheld portion directly to the IRS on your behalf.

Think of it like paycheck withholding at a job. Your employer sends part of your pay to the IRS throughout the year, and you settle up when you file your tax return. Sports betting withholding works the same way. The sportsbook acts as the intermediary, forwarding a percentage of qualifying winnings to the IRS so you do not face a massive tax bill all at once.

Withholding is not the same as your final tax obligation. The withheld amount is a prepayment, a credit toward whatever you actually owe. Depending on your total income and tax bracket, you might owe more than what was withheld, or you might get some of it back as a refund.

When withholding occurs, the sportsbook issues you a Form W-2G documenting the winnings and the amount withheld. This form is also sent to the IRS, so they have a record of both the income and the prepayment.

When do sportsbooks withhold taxes?

Federal law requires sportsbooks to withhold taxes when your winnings meet specific thresholds. The rules depend on both the amount won and the odds of the bet.

The standard withholding threshold

A sportsbook must withhold 24% of your winnings when both of these conditions are met:

• Your net winnings exceed $5,000
• The payout is at least 300 times your wager

Net winnings means the payout minus your original bet amount. If you wager $10 on a parlay and win $6,000, your net winnings are $5,990. Because $5,990 exceeds $5,000 and the payout is 600 times your wager, the sportsbook withholds 24% of the $5,990.

How thresholds apply to different bet types

The $5,000/300x rule applies uniformly to sports wagers at licensed sportsbooks. Here is how it works in practice:

Bet Type	Wager	Payout	Net Winnings	Odds Multiple	Withholding?
Parlay	$10	$8,500	$8,490	850x	Yes (both thresholds met)
Moneyline	$500	$6,200	$5,700	12.4x	No (under 300x)
Futures	$20	$7,000	$6,980	350x	Yes (both thresholds met)
Spread	$110	$5,210	$5,100	47.4x	No (under 300x)
Parlay	$50	$4,800	$4,750	96x	No (under $5,000 and 300x)

The key takeaway: most straight bets on spreads and moneylines never trigger withholding because the odds multiple is far below 300x. Parlays and long-shot futures are the bet types most likely to cross both thresholds.

Even when withholding does not apply, you are still required to report all gambling winnings on your tax return. Withholding simply determines whether the sportsbook collects tax upfront. For details on the actual tax rate on your sports betting winnings, that depends on your overall income and tax bracket.

The 24% federal withholding rate explained

The standard federal withholding rate on gambling winnings is 24%. This is a flat rate applied to all qualifying winnings regardless of your actual income level or tax bracket.

Why 24% may not match your actual tax rate

The 24% withholding rate is an estimate, not your final tax rate. Your actual federal income tax rate depends on your total taxable income for the year.

If your total income puts you in the 10% or 12% bracket, the 24% withheld is more than you actually owe on those winnings. You would receive the difference back as a refund when you file your return.

If you earn enough to land in the 32% or 37% bracket, the 24% withholding is less than your actual rate. You would owe additional tax on those winnings when you file.

For many bettors in the 22% or 24% brackets, the withholding amount is close to what they actually owe, and the difference at filing time is relatively small.

An example

Suppose you win a $15,000 parlay on a $10 bet. The sportsbook withholds 24% of $14,990 (your net winnings), which equals $3,597.60. You receive $11,392.40 in your account.

When you file your tax return, these winnings are added to the rest of your income. If your effective federal rate on those winnings turns out to be 22%, you actually owe $3,297.80 in tax on that amount. The IRS would refund the $299.80 difference. If your rate is 32%, you would owe an additional $1,199.20 beyond what was withheld.

Backup withholding: the 24% you cannot avoid

Backup withholding is a separate mechanism that can apply even when the standard withholding thresholds are not met. The rate is also 24%, but the triggers are different.

What triggers backup withholding

A sportsbook must apply backup withholding in these situations:

• You fail to provide your Social Security number (or Taxpayer Identification Number) when requested
• You provide an incorrect TIN
• The IRS notifies the sportsbook that you are subject to backup withholding due to previous underreporting

With backup withholding, the sportsbook withholds 24% from reportable winnings ($600 or more at 300x odds) regardless of whether the $5,000 standard threshold is met.

How to avoid backup withholding

The simplest way to avoid backup withholding is to provide accurate personal information when you set up your sportsbook account. Verify that your name, Social Security number, and address match your tax records exactly. If you receive an IRS notice about backup withholding, work with a tax professional to resolve the underlying issue.

For more on what sportsbooks are required to report, see our guide on whether sportsbooks report to the IRS.

State tax withholding on sports betting

Federal withholding is only part of the picture. Many states also require sportsbooks to withhold state income tax on gambling winnings.

States that withhold

State withholding rules vary widely. Some states require withholding on all gambling winnings reported on a W-2G. Others set their own dollar thresholds. State withholding rates typically range from 3% to 10%, though some states go higher.

If you bet in a state with no income tax, such as Florida, Texas, Nevada, or Wyoming, there is no state withholding on your winnings. However, if you live in a state with income tax and bet in a no-income-tax state, you may still owe state tax to your home state when you file your return.

Multi-state betting considerations

Online betting creates complexity for bettors who wager across state lines. The state where the bet is placed (determined by your physical location at the time) typically has the right to withhold. If your home state also taxes gambling income, you may receive a credit for taxes withheld by the other state, but the rules differ by jurisdiction. Keep records of which state you were in for each session.

What happens to withheld taxes

When a sportsbook withholds taxes from your winnings, the money goes through a clear path:

1. The sportsbook deducts the withholding amount from your payout
2. The sportsbook sends the withheld funds to the IRS (and the state, if applicable)
3. You receive a Form W-2G showing your gross winnings and the amount withheld
4. When you file your annual tax return, the withheld amount appears as a tax credit
5. Your return calculates whether you owe additional tax or are due a refund

The W-2G is your proof of withholding. Keep every copy you receive. The sportsbook also files a copy with the IRS, so the agency already knows about both the income and the prepayment. For step-by-step filing instructions, see our guide on how to report sports betting winnings on your tax return.

Can you get withheld taxes back?

Yes, in certain situations. Whether you receive a refund depends on your overall tax picture for the year.

When you get a refund

You are likely to get some or all of the withheld amount back if:

• Your total taxable income puts you in a tax bracket below 24%
• Your gambling losses for the year offset a significant portion of your winnings (you must itemize deductions to claim losses)
• The total amount withheld across all W-2Gs exceeds your actual tax liability

When you owe more

You will owe additional tax beyond what was withheld if:

• Your income puts you in a bracket above 24% (32%, 35%, or 37%)
• You had other gambling winnings during the year that were not subject to withholding
• State taxes are owed that were not withheld at the source

The loss deduction factor

Gambling losses can offset winnings, but only if you itemize deductions on Schedule A instead of taking the standard deduction. You can only deduct losses up to the amount of your reported gambling winnings. For example, if you won $15,000 and lost $10,000, you can deduct up to $10,000 in losses but you must report the full $15,000 in income. You need detailed records of all bets to support loss deductions.

How to prepare for tax withholding

Planning ahead makes tax season simpler and prevents surprises.

Keep detailed records. Track every bet you place, including the date, sportsbook, amount wagered, and result. Most sportsbooks provide annual summaries, but your own records are the best defense in case of discrepancies.

Know your bracket. If you know your approximate tax bracket, you can estimate whether the 24% withholding will be too much or too little. This helps you plan for any balance due at filing time.

Set aside money for large wins. If a big payout does not trigger withholding (for example, a $6,000 moneyline win on a $500 bet), remember that you still owe tax on those winnings. Setting aside 20-30% of non-withheld winnings prevents a cash crunch at tax time.

Consider a tax professional. If you bet frequently or win significant amounts, a tax professional who understands gambling income can help you optimize deductions and avoid mistakes. This is especially valuable if you bet in multiple states or had a year with large wins and losses.

Frequently asked questions

At what amount does a sportsbook withhold taxes from winnings?

Sportsbooks must withhold 24% of your net winnings when the payout exceeds $5,000 AND the winnings are at least 300 times your wager. Both conditions must be met. A $6,000 win on a $500 bet does not trigger withholding because the payout is only 12 times the wager, even though it exceeds $5,000.

Is the 24% withholding rate the same as my tax rate?

No. The 24% withholding rate is a flat prepayment, not your actual tax rate. Your real rate depends on your total taxable income. If you are in a lower bracket, you will get some of that 24% back as a refund. If you are in a higher bracket, you will owe additional tax when you file.

Do online sportsbooks withhold taxes the same as retail sportsbooks?

Yes. Licensed online sportsbooks follow the same federal withholding rules as retail (in-person) sportsbooks. The $5,000/300x threshold and the 24% rate apply identically. The sportsbook issues a W-2G regardless of whether you placed the bet online or at a physical location.

Can I avoid tax withholding on sports betting winnings?

You cannot opt out of withholding when the thresholds are met. If your net winnings exceed $5,000 and the payout is 300x or more your wager, the sportsbook is legally required to withhold 24%. However, most standard sports bets (spreads, moneylines, and moderate parlays) do not reach both thresholds.

What happens if a sportsbook does not withhold taxes from my payout?

If your winnings do not meet the withholding thresholds, the sportsbook pays you the full amount with no tax deducted. You are still required to report those winnings as income on your tax return and pay any tax owed. The absence of withholding does not mean the winnings are tax-free.

Do I still owe taxes if the sportsbook already withheld 24%?

It depends on your tax bracket. If your effective rate on those winnings is above 24%, you owe the difference. If your rate is below 24%, you receive a refund for the excess. The withheld amount is a credit on your return, not a final settlement.

How do I claim back over-withheld taxes on sports betting?

Report your gambling winnings and the withheld amount on your federal tax return using the information from your W-2G forms. The IRS calculates whether you are owed a refund based on your total income and tax liability. If you are due a refund, it is processed as part of your normal return.

Does state tax withholding happen automatically on sports bets?

It depends on the state. Some states require sportsbooks to withhold state income tax on any gambling winnings that trigger a W-2G. Others do not require withholding at all. States with no income tax have no state withholding. Check your state revenue department for specific rules.