Sports Betting Taxes: Complete Guide to Reporting Gambling Winnings

Sports betting taxes catch many bettors off guard. Whether you hit a big parlay last weekend or you have been grinding NFL spreads all season, the IRS wants its share of your winnings. This guide explains exactly when you owe tax, how to report your betting income, and what the new OBBBA rules mean for 2026 and beyond. You can also use our sports betting tax calculator to estimate your bill in minutes.

Important: This guide is for general educational purposes only and does not constitute tax, legal, or financial advice. Tax laws change frequently, and individual circumstances vary significantly. Always consult a qualified tax professional or CPA for advice specific to your situation before filing your taxes. The IRS website (irs.gov) and your state revenue department are the authoritative sources for current tax rules.

Sports betting taxes in 2025-2026: why this guide matters

Legal sports betting is now available in more than 35 states, and US bettors wagered over $100 billion in 2024 alone. With that growth comes increased IRS scrutiny and more complex tax obligations for everyday bettors.

Tax season can feel overwhelming when you use multiple sportsbooks, hit the occasional parlay, and redeem bonus bets throughout the year. The rules around gambling income are not intuitive, and most mainstream tax guides focus on casino gamblers rather than sports bettors like you.

This guide serves as your 2025-2026 survival guide. We cover everything from basic obligations (yes, all winnings are taxable) to the coming changes under the One Big Beautiful Bill Act (OBBBA), which introduces a 90 percent cap on gambling loss deductions starting in 2026.

OBBBA creates a new concept that bettors need to understand: phantom income. Under the new rules, you could owe taxes even if you broke even or lost money for the year. We explain how this works and show you how to plan ahead.

Throughout this article, you will learn when you owe tax, how federal and state rules interact, how to report your winnings step by step, and how to use our Sports Betting Tax Calculator to model different scenarios. We also link to detailed guides on Form W-2G, reporting mechanics, and loss deductions for deeper dives.

Higher betting volume increases both your potential tax bill and the complexity of your return. We encourage you to bet within your means and view taxes as part of the overall cost of betting, not something to avoid or ignore.

Do you have to pay taxes on sports betting winnings?

Yes, you must pay taxes on sports betting winnings. All gambling income is taxable at the federal level in the United States, regardless of whether you receive any tax forms from your sportsbook.

This applies to every type of sports bet you might place:

• Straight bets on moneylines, spreads, and totals
• Parlays and same-game parlays
• Futures bets on championships, MVPs, and season outcomes
• Daily fantasy sports (DFS) contest winnings
• Promotional contests and free-to-play pools with cash prizes
• Bonus bet winnings (the net profit, not the bonus credit itself)

The IRS treats gambling winnings as other income on your tax return. It does not matter if you bet online or at a retail sportsbook. It does not matter if you use one app or ten. The tax obligation is the same.

Many bettors mistakenly believe that gambling income only counts if you receive a Form W-2G. This is false. You are legally required to report all gambling winnings, even when no form is issued. The sportsbook may not track every bet you win, but the IRS expects accurate reporting.

One common source of confusion is the difference between net and gross. At the federal level, your gambling income is generally calculated based on individual sessions or wagers, not your yearly net result. However, you may be able to deduct losses up to the amount of your winnings if you itemize (more on this below). The upcoming OBBBA changes make this calculation more complex starting in 2026.

Scenario	Taxable?	Notes
You win a $200 NFL parlay	Yes	All winnings are taxable income
You win $50 from a bonus bet promo	Yes	Net profit from bonus bet is taxable
You lose money overall for the year	Yes (on gross wins)	Individual wins are taxable; losses may be deductible separately
Your sportsbook did not send you a W-2G	Yes	Reporting is required regardless of forms received

How much can you win before paying tax on sports betting?

There is no magic threshold below which sports betting winnings become tax-free. Every dollar of gambling income is technically taxable.

What confuses many bettors is the W-2G reporting threshold. Sportsbooks issue Form W-2G for certain wins, typically when the payout is at least $600 and at least 300 times the original wager. But this threshold only determines when the sportsbook sends paperwork to the IRS. It has nothing to do with whether you personally owe tax.

Consider this example:

• You win a $400 parlay at +250 odds. No W-2G is issued.
• You win a $3,000 parlay at +35000 odds. W-2G is issued with 24 percent withheld.

In both cases, the winnings are taxable. The only difference is that the second win triggers automatic IRS notification and withholding.

Win Amount	Odds	W-2G Issued?	Taxable?
$100	-110	No	Yes
$500	+200	No	Yes
$600	+400 (300:1 ratio)	Yes	Yes
$2,500	+50000	Yes	Yes

The bottom line: report all your gambling winnings, not just the ones that appear on official forms. The IRS can cross-reference your bank deposits, sportsbook records, and other data sources.

How sports betting winnings are taxed at the federal level

The IRS classifies gambling winnings as other income, which means they are taxed at your ordinary income tax rate. Unlike capital gains from investments, there is no preferential rate for gambling income.

Your gambling winnings get added to your total income for the year, which may push some of those winnings into a higher marginal tax bracket. If you normally earn $70,000 and win $10,000 betting on sports, that $10,000 is taxed at your marginal rate (22 percent for most of those dollars in 2025).

For casual bettors, the tax treatment is straightforward:

1. Report gambling winnings as other income on Form 1040
2. If you itemize deductions, you may deduct gambling losses (up to the amount of winnings) on Schedule A
3. Pay any tax owed after accounting for withholding and credits

Professional gamblers face different rules. If gambling is your primary occupation and you meet specific IRS criteria, you may report gambling activity on Schedule C and deduct business expenses. However, the vast majority of sports bettors are casual gamblers under IRS definitions. This guide focuses on the casual bettor experience.

When your winnings trigger a W-2G, the sportsbook typically withholds 24 percent for federal taxes. This withholding appears as a credit on your return, similar to employer payroll withholding. You may owe more or receive a refund depending on your total tax situation.

Profile	Annual Gambling Wins	Est. Federal Tax Rate	Notes
Casual bettor earning $50K salary	$2,000	22%	$440 additional federal tax
Semi-serious bettor earning $80K salary	$15,000	22-24%	Some winnings may hit 24% bracket
High-volume bettor with large parlay hits	$50,000	22-32%	Portion may hit higher brackets

Losses are a separate topic. You cannot simply subtract your losses from your winnings before reporting. The loss deduction is an itemized deduction with specific rules, which OBBBA will change significantly in 2026. We cover this in detail below.

What counts as gambling income for sports bettors?

The IRS definition of gambling income covers virtually all sports betting activity:

Straight bets: Moneyline, point spread, and totals wagers on any sport. The full profit (payout minus stake) is taxable when you win.

Parlays and SGPs: Same-game parlays and multi-leg parlays are taxable. These often trigger W-2G forms because of the high odds ratios involved.

Futures: Your futures bet on the Chiefs to win the Super Bowl at +800 is taxable when it cashes. The tax event occurs when you win, not when you placed the bet.

Daily fantasy sports: DFS contest winnings are gambling income. Sites like DraftKings and FanDuel DFS issue 1099s for significant winnings.

Promotional winnings: Contest prizes, referral bonuses paid in cash, and promotional payouts are generally taxable.

Bonus bet profits: Here is where it gets nuanced. When you receive a $100 bonus bet, the credit itself is not taxable income. However, if you win $200 using that bonus bet (net profit of $200, since you did not risk your own money on the bonus), that $200 is taxable. The taxable amount is your net win, not the face value of the bonus.

Online betting and retail betting follow the same rules. Using a betting app at home or placing a wager at a sportsbook window creates identical tax obligations.

W-2G thresholds and withholding on sports betting wins

Form W-2G is the official IRS form for reporting gambling winnings. Sportsbooks issue W-2Gs when your win meets specific criteria:

For sports betting, a W-2G is typically required when:

• The proceeds are $600 or more, AND
• The payout is at least 300 times the amount wagered

This 300:1 ratio means most straight bets and small parlays do not trigger W-2Gs. But a 5-leg parlay that pays +35000 easily meets the threshold.

When a W-2G is issued, the sportsbook usually withholds 24 percent for federal income tax. This withholding is sent directly to the IRS and credited to your account when you file your return.

If you provide a valid Social Security Number, withholding is at the standard 24 percent rate. Without an SSN on file, backup withholding of 24 percent still applies, but the sportsbook flags the payment differently.

Key points about W-2G:

• You will receive a copy of the form, and the IRS receives one automatically
• The form shows your winnings and the amount withheld
• You must report W-2G income on your tax return
• Withholding is a prepayment of tax, not the final amount owed

Not receiving a W-2G does not mean your winnings are invisible to the IRS. Sportsbooks maintain detailed records, and discrepancies between reported income and lifestyle can trigger audits.

For a complete breakdown of W-2G rules and how to use the form when filing, see our sports betting W-2G form guide.

Tax forms and documents: how your sportsbook activity shows up at tax time

Tax season for sports bettors means gathering documents from every sportsbook you used during the year. The main forms and records include:

Form W-2G: Issued for qualifying wins as described above. Each large parlay or long-shot winner that meets the threshold generates its own W-2G.

Form 1099-MISC or 1099-K: Some sportsbooks issue 1099s for promotional payments, referral bonuses, or (in some cases) aggregate winnings. The specific form depends on how the sportsbook categorizes the payment.

Win/loss statements: Most major sportsbooks provide annual win/loss statements in January or February. These summarize your total deposits, withdrawals, wins, and losses for the calendar year.

Account history exports: Apps like DraftKings, FanDuel, BetMGM, and Caesars let you download your complete betting history as a CSV file. This includes every wager, the date, amount, odds, and outcome.

Your own records: If you track bets manually or use a spreadsheet, these personal records are valuable for substantiating loss deductions.

Form W-2G for sports betting wins

When you hit a big parlay, the celebration may be interrupted by the sportsbook asking for your Social Security Number. That is because they are preparing a W-2G.

Example scenario: You place a $10 6-leg NFL parlay at +40000 odds. It hits for a $4,000 payout. The sportsbook issues a W-2G showing $4,000 in winnings. They withhold $960 (24 percent) and pay you $3,040. You receive a copy of the W-2G and so does the IRS.

When filing your taxes, the $4,000 appears as gambling income. The $960 withheld appears as a credit toward your tax bill. If your actual tax on those winnings is less than $960, you get a refund of the difference. If it is more, you owe the balance.

W-2Gs are especially common for:

• Long-shot parlays (high odds mean even moderate wins meet the 300:1 threshold)
• Futures bets that cash at long odds
• Large promotional contest prizes

For step-by-step guidance on handling W-2G forms, visit our detailed Form W-2G explainer.

Other documents: 1099s, win/loss statements and app exports

Beyond W-2Gs, you may receive other tax documents from sportsbooks:

1099-MISC: Sometimes issued for promotional bonuses, referral payouts, or contest prizes that do not qualify for W-2G treatment.

1099-K: If you receive payments through a payment processor and exceed certain thresholds, a 1099-K may be issued. This is less common for gambling winnings but possible in some situations.

Win/loss statements: These are not official IRS forms, but they provide a summary of your annual activity. Most sportsbooks make these available by early February. Log into each app, navigate to your account settings or tax documents section, and download your statement.

CSV exports: Detailed betting history exports let you verify every wager. These are useful for substantiating loss deductions and reconciling numbers with your records.

Best practice: Download documents from every sportsbook you used as soon as they become available. Store them with your tax files. If you use five different apps, you need documents from all five.

Can you deduct sports betting losses on your taxes?

You may be able to deduct sports betting losses on your federal tax return, but only under specific conditions:

1. You must itemize deductions on Schedule A (most taxpayers take the standard deduction)
2. You can only deduct losses up to the amount of your gambling winnings
3. You need documentation to support your claimed losses

This is a crucial distinction: gambling losses are not subtracted from gambling income before you report it. Instead, you report all your gambling income as other income, then claim a separate itemized deduction for losses.

Example: You won $8,000 betting on sports but lost $10,000 over the same period. You report $8,000 in gambling income. If you itemize, you can deduct up to $8,000 in gambling losses. The remaining $2,000 in losses provides no tax benefit because you cannot deduct more than you won.

For most casual bettors, the standard deduction ($14,600 single, $29,200 married filing jointly in 2025) exceeds their itemized deductions, including gambling losses. In that case, you get no direct tax benefit from your losses.

The full guide to deducting sports betting losses covers the mechanics in detail, including record-keeping requirements and common pitfalls.

Gambling loss deduction rules in 2026 and beyond (OBBBA)

The One Big Beautiful Bill Act (OBBBA) introduces significant changes to gambling loss deductions starting in 2026. The most impactful provision: you can only deduct 90 percent of your gambling losses, even if you have enough winnings to cover them.

Current rules (2025 and earlier):

• Deduct gambling losses up to 100 percent of gambling winnings
• No loss, no gain if you itemize and have equal wins and losses

OBBBA rules (2026 and later):

• Deduct gambling losses up to only 90 percent of gambling winnings
• The remaining 10 percent creates taxable phantom income

This change fundamentally alters tax outcomes for active bettors.

Scenario	Pre-2026 Taxable Income	Post-2026 Taxable Income (OBBBA)
$10K wins, $10K losses (break-even)	$0	$1,000 (phantom income)
$20K wins, $18K losses ($2K profit)	$2,000	$3,800 ($2K profit + $1,800 phantom)
$50K wins, $55K losses ($5K loss)	$0	$5,000 (phantom income)

In the third scenario, a bettor who actually lost $5,000 for the year still owes taxes on $5,000 of phantom income under OBBBA. They can only deduct $45,000 of their $55,000 in losses (90 percent of $50,000 in wins).

The impact is most severe for high-volume bettors who churn significant handle but break even or lose modestly. Under current rules, they owe nothing. Under OBBBA, they face real tax liability on income they never actually received.

For a deeper dive into loss deduction strategies, visit our gambling loss deduction guide.

Phantom income: when you owe tax even if you barely broke even

Phantom income is the term for taxable income that exists on paper but never landed in your pocket as profit. OBBBA creates phantom income for many sports bettors by capping loss deductions at 90 percent.

Case study 1: High-volume NFL bettor

Marcus bets NFL games every weekend. He is disciplined, tracks everything, and targets 52-53 percent win rates on spreads. Over the 2026 season, he wagers $200,000 in total handle, wins $195,000, and loses $195,000. He is essentially break-even.

Under OBBBA:

• Gross gambling income: $195,000
• Allowable loss deduction: 90% of $195,000 = $175,500
• Taxable phantom income: $195,000 - $175,500 = $19,500

At a 24 percent marginal rate, Marcus owes approximately $4,680 in federal tax on a year where he made zero actual profit.

Case study 2: March Madness tournament bettor

Sarah fills out brackets and makes parlay bets throughout the NCAA Tournament. She hits one big 8-leg parlay for $12,000 but loses $14,000 on other bets. She is down $2,000 for the year.

Under OBBBA:

• Gross gambling income: $12,000
• Allowable loss deduction: 90% of $12,000 = $10,800
• Taxable phantom income: $1,200

Sarah owes tax on $1,200 despite losing money overall.

The phantom income problem is amplified in states that disallow gambling loss deductions entirely (like Massachusetts) or have their own caps. A bettor in a high-tax, no-deduction state faces both federal phantom income and state tax on their full gross winnings.

Use our Sports Betting Tax Calculator to see your own phantom income risk under different scenarios.

State sports betting tax rates and where you live matters

Federal taxes are only half the picture. Most states also tax gambling income, and rates vary dramatically.

State gambling income tax generally mirrors your ordinary state income tax rate. Some key categories:

Tax-free states (no state income tax): Texas, Florida, Nevada, Washington, Wyoming, South Dakota, Alaska, Tennessee (no wage tax), New Hampshire (no wage tax).

If you live in a no-income-tax state, you pay federal tax on gambling winnings but owe nothing additional to the state.

Typical tax states: Most states tax gambling income at standard income tax rates, ranging from roughly 3 percent to 10 percent depending on your bracket and state.

High-tax states: California (up to 13.3 percent), New York (up to 10.9 percent), New Jersey (up to 10.75 percent).

Restrictive states: Massachusetts is particularly problematic because it does not allow gambling loss deductions at all. If you win $50,000 and lose $50,000 in Massachusetts, you still owe state tax on the full $50,000.

State Category	Examples	Tax Impact
No income tax	TX, FL, NV, WA, WY	Federal only
Allows loss deduction	NJ, PA, CO, AZ	Similar to federal treatment
No loss deduction	MA, IN, WI	Full gross winnings taxed
High state rate	CA, NY, NJ	Combined rate can exceed 35%

For detailed information on your state, see our state-by-state sports betting tax breakdown.

How state rules interact with OBBBA and phantom income

Starting in 2026, bettors in restrictive states face a double hit: federal phantom income from OBBBA plus full state taxation on gross winnings.

Example comparison:

Bettor A (Florida resident):

• $30,000 in gross wins, $30,000 in losses
• Federal phantom income under OBBBA: $3,000
• State tax: $0 (no state income tax)
• Total extra tax vs break-even: approximately $720 federal

Bettor B (Massachusetts resident):

• $30,000 in gross wins, $30,000 in losses
• Federal phantom income under OBBBA: $3,000
• State tax: 5% of $30,000 = $1,500 (no loss deduction)
• Total extra tax vs break-even: approximately $720 federal + $1,500 state = $2,220

Same betting results, but Bettor B pays three times more in taxes due to state rules.

For state-specific guidance and legal status, visit our state sports betting guides.

How to report sports betting winnings on your tax return

Reporting sports betting income is straightforward once you understand the process. Here is the high-level overview:

Step 1: Gather your documents

Collect W-2Gs, 1099s, win/loss statements, and betting history exports from every sportsbook. Reconcile the numbers to ensure nothing is missing.

Step 2: Calculate your total gambling income

Add up all your gambling winnings for the year. Use win/loss statements and your records. This total goes on your return.

Step 3: Report gambling income on Form 1040

Gambling winnings are reported as other income on Schedule 1, which flows to Form 1040. The exact line depends on the tax year, but it is typically in the other income section.

Step 4: Report W-2G withholding

Any federal tax withheld (shown on your W-2Gs) goes on the payments section of Form 1040. This reduces your tax owed or increases your refund.

Step 5: Claim loss deduction if itemizing

If your itemized deductions exceed the standard deduction and you have gambling losses, claim them on Schedule A. The deduction cannot exceed your total gambling winnings reported in Step 3.

Step 6: File state returns

Most states require you to report gambling income on your state return. Some states have separate forms for gambling-specific reporting.

For a complete step-by-step walkthrough with form screenshots and examples, see our guide to reporting sports betting winnings on your tax return.

Filing options:

• DIY with paper forms (complex, not recommended)
• Tax software (TurboTax, H&R Block, etc. have gambling income sections)
• Tax professional (recommended for complex situations or large amounts)

If you have significant gambling income, multiple W-2Gs, or live in a restrictive state, consider consulting a tax professional who understands gambling taxation.

Withdrawals vs winnings: what actually gets taxed?

One of the most persistent myths in sports betting is that taxes are based on withdrawals. This is false.

The truth: Your tax obligation is based on gambling winnings, not withdrawals. The IRS uses the concept of constructive receipt, which means income is taxable when you have the right to access it, not when you actually take the money out.

If you win $5,000 on a parlay and leave it in your DraftKings account, you owe tax on that $5,000 for the year you won it. Whether you withdraw it, reinvest it, or let it sit there makes no difference.

This myth persists because some bettors assume their bank statements are the only thing that matters. They are wrong. Sportsbooks report your wins regardless of withdrawals, and the IRS expects you to report accurately.

Myth: I did not withdraw anything, so I do not owe taxes.

Reality: Winnings are taxable when earned, regardless of withdrawals. Leaving money in your app does not defer or avoid tax.

Record-keeping and tracking: setting yourself up for stress-free tax season

Good records make tax season manageable and support your loss deductions if questioned by the IRS. Here is what to track:

Per-book annual summaries:

• Total deposits
• Total withdrawals
• Gross winnings
• Gross losses
• Net result

Detailed betting history (optional but recommended):

• Date of each bet
• Sport and event
• Bet type (spread, moneyline, parlay, etc.)
• Amount wagered
• Odds
• Outcome (win/loss/push)
• Payout

Supporting documents:

• Screenshots of major wins
• W-2Gs and 1099s
• Win/loss statements from each sportsbook
• Bank statements showing deposits and withdrawals

Tracking methods:

• Spreadsheet: Simple and effective. Create columns for each data point and update after each session.
• Betting tracker apps: Dedicated apps can sync with sportsbooks or allow manual entry. Some generate tax reports.
• Manual log: A notebook works in a pinch but is harder to organize and search.

The IRS generally expects substantiation for claimed gambling losses. Keeping organized records protects you in case of an audit and makes filing easier.

For detailed record-keeping best practices, see our guide to sports betting records for tax season.

Do sportsbooks report your betting activity to the IRS?

Major sportsbooks are required to report certain gambling activity to the IRS. Understanding what gets reported helps you stay compliant.

W-2G reporting: As discussed, sportsbooks file W-2Gs for qualifying wins. The IRS receives a copy automatically.

1099 reporting: Some promotional payments and bonuses trigger 1099 reporting, especially if they exceed $600 in aggregate.

Regulatory records: Licensed sportsbooks maintain detailed records of all betting activity. While they do not report every $20 bet to the IRS, these records exist and can be subpoenaed.

The under-$600 myth: Many bettors believe that winnings under $600 are invisible to the IRS. While it is true that W-2Gs are not issued for small wins, that does not mean those wins are tax-free. You are still legally required to report them.

Sportsbooks have a strong incentive to comply with IRS requirements. Their licenses depend on it. Assume that anything significant is trackable.

Where to find your DraftKings, FanDuel and BetMGM tax documents

Navigating sportsbook apps for tax documents is not always intuitive. Here is where to find what you need:

DraftKings:

• Open the DraftKings app or log in at draftkings.com
• Go to your account settings (tap your profile icon)
• Look for Tax Documents or Tax Center
• Download your W-2Gs and win/loss statement

FanDuel:

• Log into FanDuel Sportsbook
• Navigate to Account and then Tax Information
• Download available W-2Gs and annual statements
• You can also request detailed betting history exports

BetMGM:

• Log into the BetMGM app or website
• Go to your Account and look for My Activity or Tax Documents
• Download your year-end statement and any W-2Gs

Caesars, PointsBet, and others:

• Similar process: Account Settings, then Tax or Financial section
• Look for annual statements, W-2Gs, and betting history

Pro tips:

• Tax documents typically become available in late January or February
• Download your full betting history, not just official tax forms
• If you cannot find documents, contact customer support
• Save everything in a dedicated folder for tax season

For more on what sportsbooks report and how to request records, see our guide to sportsbook tax reporting requirements.

Estimate your bill with the Sports Betting Tax Calculator

Our Sports Betting Tax Calculator helps you model your tax situation before filing. It estimates your federal and state tax burden based on your betting results, income, and filing status.

The calculator offers two modes:

Current rules mode (2025): Calculates taxes based on existing law where you can deduct gambling losses up to 100 percent of your gambling winnings.

OBBBA mode (2026+): Models the 90 percent loss deduction cap and shows your phantom income risk.

The calculator accounts for:

• Your total gambling winnings
• Your total gambling losses
• Your regular income and filing status
• Your state of residence
• Whether you itemize or take the standard deduction

Important limitations - please read:

• This calculator provides rough estimates only and should not be used for actual tax filing
• It does not constitute tax, legal, or financial advice
• Tax brackets, deductions, and state rules are simplified and may not reflect your actual situation
• Individual circumstances vary significantly based on other income, deductions, credits, and filing details
• State calculations use simplified flat rates; actual state taxes depend on brackets, local taxes, and state-specific rules
• OBBBA rules (2026+) are based on proposed legislation and may change before implementation
• Always verify calculations with a qualified tax professional, CPA, or tax software before filing
• For authoritative guidance, consult the IRS (irs.gov) and your state revenue department

Use the calculator to see how different scenarios affect your tax bill. Try modeling a big parlay win, compare current rules vs OBBBA, or see how your state impacts the outcome.

How to use the calculator step by step

Here is a walkthrough for a typical use case:

1. Enter your regular income: Your salary, wages, and other non-gambling income. This determines your tax bracket.

2. Select your filing status: Single, married filing jointly, married filing separately, or head of household.

3. Choose your state: The calculator applies your state income tax rate and any state-specific rules.

4. Enter gambling winnings: Your total gross gambling winnings for the year from all sportsbooks.

5. Enter gambling losses: Your total gambling losses for the year.

6. Select tax year mode: Choose 2025 (current rules) or 2026+ (OBBBA rules) to compare.

7. Review results: The calculator shows your estimated federal tax on gambling income, state tax, effective rate, and phantom income (if applicable).

Example using current rules:

• Regular income: $60,000
• Filing status: Single
• State: Pennsylvania
• Gambling winnings: $8,000
• Gambling losses: $6,000
• Mode: 2025

Result: approximately $1,760 federal tax on $8,000 gambling income (22 percent marginal rate). If itemizing, loss deduction reduces taxable gambling income to $2,000, resulting in approximately $440 federal tax attributable to gambling.

Example scenarios: casual bettor vs high-volume bettor

Let us compare three common scenarios to illustrate how taxes work in practice:

Scenario 1: Casual bettor with modest net win

• Profile: Weekend NFL bettor, uses two apps
• Gross wins: $4,000
• Gross losses: $3,000
• Net result: +$1,000 profit
• Regular income: $55,000
• State: Colorado

Under 2025 rules: Reports $4,000 income. If itemizing, deducts $3,000. Taxable gambling income: $1,000. Federal tax on gambling: approximately $220.

Under OBBBA (2026): Reports $4,000 income. Can deduct 90 percent of $4,000 = $3,600, but losses only $3,000. Deduction limited to $3,000. Taxable: $1,000. No phantom income in this case because losses are below the cap.

Scenario 2: High-volume bettor who breaks even

• Profile: Daily bettor using five apps
• Gross wins: $75,000
• Gross losses: $75,000
• Net result: Break-even
• Regular income: $85,000
• State: New Jersey

Under 2025 rules: Reports $75,000 income. If itemizing, deducts $75,000. Taxable gambling income: $0.

Under OBBBA (2026): Reports $75,000 income. Can deduct 90 percent of $75,000 = $67,500. Taxable phantom income: $7,500. Federal tax on phantom income: approximately $1,800.

Scenario 3: Big parlay winner in a high-tax state

• Profile: Recreational bettor who hit a life-changing parlay
• Gross wins: $100,000 (one big parlay)
• Gross losses: $5,000
• Net result: +$95,000 profit
• Regular income: $70,000
• State: California

Under 2025 rules: Reports $100,000 income. If itemizing, deducts $5,000. Taxable gambling income: $95,000. Pushed into higher brackets. Estimated federal: approximately $21,000. California state: approximately $8,500. Total: approximately $29,500.

Under OBBBA (2026): Same outcome since losses ($5,000) are well below 90 percent cap ($90,000). No phantom income. Total: approximately $29,500.

Scenario	Gross Wins	Gross Losses	2025 Federal Tax	2026 Federal Tax (OBBBA)
Casual (+$1K)	$4,000	$3,000	$220	$220
High-volume (break-even)	$75,000	$75,000	$0	$1,800
Big winner (+$95K)	$100,000	$5,000	$21,000	$21,000

Common myths and mistakes about sports betting taxes

Misinformation about sports betting taxes is everywhere. Here are the most common myths and the facts:

Myth 1: Under $600 means tax-free

Reality: The $600 threshold is about W-2G issuance, not tax obligations. All gambling winnings are taxable regardless of amount.

Myth 2: No W-2G means no tax

Reality: You must report gambling income even if no forms are issued. The IRS expects accurate self-reporting.

Myth 3: Only withdrawals are taxed

Reality: Constructive receipt means winnings are taxable when earned, not when withdrawn. Leaving money in your app does not defer taxes.

Myth 4: I can deduct all my losses in 2026

Reality: OBBBA caps deductions at 90 percent of winnings starting in 2026. The 10 percent gap creates phantom income.

Myth 5: State taxes do not apply to online betting

Reality: Your state of residence determines state tax obligations, regardless of whether you bet online or in person.

Myth 6: I lost money overall, so I owe nothing

Reality: If you had any gross wins during the year, you have gambling income to report. Whether you can offset it with losses depends on itemizing and (after 2025) OBBBA limits.

Myth 7: Bonus bets are tax-free money

Reality: The profit from bonus bets is taxable. The bonus credit itself is not income, but your net winnings from using it are.

Avoiding these misconceptions keeps you compliant and prevents surprises at tax time.

Frequently Asked Questions

Do you have to pay taxes on sports betting winnings?

Yes, all gambling winnings are taxable at the federal level. This includes sports bets, parlays, futures, DFS winnings, and promotional prizes. You must report gambling income regardless of whether you receive a W-2G or other tax form from your sportsbook. The amount you owe depends on your total income and tax bracket.

How much can you win on sports betting before paying taxes?

There is no tax-free threshold for gambling winnings. Every dollar of gambling income is technically taxable. The W-2G reporting threshold ($600 and 300:1 odds) only determines when sportsbooks issue forms, not when you owe tax. Report all winnings, not just those documented on W-2Gs.

Do I have to report gambling winnings if I lost money overall?

Yes. Even if you had a losing year overall, you must report your gross gambling winnings. You may be able to deduct losses up to the amount of your winnings if you itemize, but this is a separate calculation. Under OBBBA rules starting in 2026, you can only deduct 90 percent of your losses, creating taxable phantom income even for break-even or losing bettors. See our loss deduction guide for details.

Is sports betting tax based on withdrawals or winnings?

Taxes are based on winnings, not withdrawals. The IRS uses constructive receipt, meaning income is taxable when you have the right to access it. Leaving winnings in your sportsbook account does not defer or avoid taxes. Report winnings for the year they were earned.

Do sportsbooks report your bets to the IRS, even under $600?

Sportsbooks issue W-2Gs for qualifying wins ($600+ with 300:1 odds), which the IRS receives automatically. Smaller wins typically are not individually reported, but you are still legally required to report them. Sportsbooks maintain detailed records of all betting activity. See our guide to sportsbook reporting for more.

Can you deduct sports betting losses on your taxes?

Yes, if you itemize deductions on Schedule A. You can deduct gambling losses up to the amount of your gambling winnings, but not beyond. Under OBBBA rules starting in 2026, deductions are capped at 90 percent of winnings. You need documentation to support loss claims. Read our complete guide to gambling loss deductions.

What is the One Big Beautiful Bill (OBBBA) gambling tax rule?

OBBBA introduces a 90 percent cap on gambling loss deductions starting in 2026. Under current rules, you can deduct losses up to 100 percent of winnings. Under OBBBA, only 90 percent is deductible, creating phantom income for many bettors. A break-even bettor with $50,000 in wins and losses would owe tax on $5,000 of phantom income.

Do I pay tax if I leave my winnings in my betting app?

Yes. Winnings are taxable when earned due to constructive receipt rules. Whether you withdraw money, reinvest it in more bets, or leave it sitting in your account makes no difference for tax purposes. You owe tax on the winnings for the year you won them.

Responsible Gambling Notice

Sports betting should be entertaining, not a source of financial stress. While understanding your tax obligations is important, remember that gambling carries risk and should never be viewed as a reliable way to make money.

Tax planning does not change the fundamental risks of gambling. If you find yourself betting more than you can afford, chasing losses, or feeling stressed about gambling, help is available. The National Council on Problem Gambling offers confidential support at 1-800-522-4700.

Set limits on your betting activity, use responsible gambling tools offered by sportsbooks, and keep gambling fun. If betting stops being enjoyable, it is time to take a break.

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Disclaimer: This article and any calculators or tools referenced are for general educational and informational purposes only. They do not constitute financial, tax, or legal advice, and should not be relied upon for making tax filing decisions. Tax laws are complex, vary by jurisdiction, and change frequently. The information provided may not reflect the most current legal developments or your specific circumstances.

Before filing your taxes: Always consult with a qualified tax professional, certified public accountant (CPA), or licensed tax preparer who can review your complete financial situation. For authoritative and up-to-date guidance, refer to the IRS website at irs.gov and your state department of revenue.

Accuracy: While we strive to provide accurate information, OddsIndex makes no warranties or representations regarding the accuracy, completeness, or applicability of the content. Use of any calculator estimates is at your own risk.

Last updated: December 2025