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Sportsbook Taxes Explained | Do You Need to Pay Betting Taxes?

Collin
Author:
Collin
Last Updated:
01/02/2023
Topic:
Betting Guide
Experiences:
Sports betting enthusiast

Sports gambling taxes

When you place a sporting bet, you’ll be hoping to win some cash for your efforts, but have you considered the tax implications? Because sportsbook taxes will certainly apply if your winnings exceed a certain amount.

On this page we’ll be examining the sports gambling taxes throughout the US, explaining everything you need to know. So if you want to stay on the right side of the IRS, be sure to take note of the important points, as it could save you late payment fees and potential fines over the long term.

An overview of gambling taxes in the US

The IRS wants to know about all of your annual income, not just your salary. That includes all winnings from gambling, whether you spin up a jackpot payout on an online slot machine, or you land a big payout from a sporting wager. Certain thresholds apply, according to the activity that gave you the win, according to the following guidelines:

  • $5,000 from playing Poker
  • $1,500 from Keno
  • $1,200 from slot machines
  • $600 from sporting bets

In some cases, the local sportsbook near me will fill out the IRS form W2-G on your behalf when you achieve a winning outcome. They may even take 25% out of your prize pot to give to the taxman on your behalf, but you should never rely on this. Not all forms of gambling require a W3-G form to be completed, particularly some popular casino games such as Roulette, Baccarat, Blackjack and Craps.

Keep comprehensive gambling records

The advice from the IRS is to keep the full details of all your wagering throughout the year, together with any relevant documentation, such as payment slips, receipts and statements. Keep records of all the wagers you make, not just the winning ones, as you can set your losses against your wins to bring down your tax burden.

You’ll need to keep records of:

  • the date of your wager
  • the type of gambling you engaged in
  • the  name of your sportsbook operator
  • the amount of your wins and losses

The more accurate your record keeping, the easier it will be to complete your tax return while avoiding any costly errors when being assessed for sportsbook taxes. And it’s a great way of keeping an eye on your overall spending too, so it’s certainly a good habit to get into!

You may have to pay state gambling taxes too

Although you’ll have to pay a sports gambling tax to the IRS, it doesn’t end there. All of  the sportsbetting legal states in the US also have their own tax laws surrounding sportsbook taxes, although there’s very little agreement between states about how much that should be.

In fact, it’s the prospect of filling up their coffers with sports gambling taxes that’s encouraging more and more states to legalize online sports betting. In those states where sports betting isn’t yet legal, bettors are frequently crossing the borders into neighboring jurisdictions which take a more relaxed view. And the states that haven’t yet permitted licensed sportsbooks to operate can sense that they’re missing out on potential income, so that’s a powerful incentive to push through new gambling laws!

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These are the current sports gambling taxes for every state

Online sports betting has opened up a whole new revenue stream for numerous states, but it hasn’t always been this way. Up until 2018, only Nevada was able to benefit from an online sports gambling tax, much to the frustration of several other states, who looked on with envy as Nevada reaped the benefits.

But all that changed with the Supreme Court’s decision to overturn PASPA in 2018. This opened up the rest of the US to the prospect of online sportsbooks, and many of them were quick to jump on board! And now, with no federal impediment to legalizing mobile sports betting, it’s down to each state to make up its own mind about whether to permit the activity. And plenty of them are opting for legalization, particularly once they see how much neighboring states are pulling in from online sportsbook taxes.

The laws are constantly changing right now, as an increasing number of states are trying to pass legislation that will enable them to claim a portion of the sports gambling taxation pie. It seems that just about every day we’re hearing news about the latest state considering making changes to its gambling laws. While it’s incredibly challenging to keep up with the best free bets today, it’s just as hard to stay up to to date with legal developments. But at the time of writing, these are the taxation rates for sports betting in all the states in which sportsbooks are currently legal:

  • Arizona:  8% for in-person sports betting, rising to 10% for online wagers
  • Arkansas: 13%
  • Colorado: 10%
  • Connecticut: 13.75% for in-person sports betting, rising to 18% for online wagers
  • Delaware: 50%
  • Illinois: 15%
  • Indiana: 9.5%
  • Iowa: 6.75%
  • Louisiana: 10% for in-person sports betting, rising to 15% for online wagers
  • Maryland: 15%
  • Michigan: 8.4%
  • Mississippi: 12%
  • Montana: the state keeps all gambling revenues minus expenses
  • Nevada: 6.75%
  • New Hampshire: 51%
  • New Jersey: 14.25%
  • New York: 51%
  • North Carolina: the state keeps all gambling revenues minus expenses
  • Ohio: 10%
  • Oregon: the state keeps all gambling revenues minus expenses
  • Pennsylvania: 36%
  • Rhode Island: 51%
  • South Dakota: 9%
  • Tennessee: 20%
  • Virginia: 15%
  • Washington: no sports betting taxes currently in force
  • West Virginia: 10%
  • Wyoming: 10%

Although this information is up to date at the time of writing, it’s essential to remember that things change very fast in the sports betting world. Be sure to double check the specific sports betting taxes in your state before you start wagering, so you know exactly what's required of you.

A wide range of state taxes for sportsbook wagering

As you’ll see from the above list, there’s very little consensus between betting companies that allow US players when it comes to deciding just how much to charge in sports gambling taxes. Right now, Washington makes no taxation demands at all on sports betting fans, although it’s possible this situation might change at some point in the future.

Nevada, Iowa, Michigan and South Dakota all have fairly low tax demands, coming in at under 10%. Of course, Nevada is the spiritual home of gambling in the US, and with so many enthusiastic bettors flocking to the state, there’s no need for punishing taxes, as the state is assured of a steady income. At the other end of the scale, we have New York, one of the latest states to introduce online sports betting – and with one of the most eye-watering taxation levels, coming in at a whopping 51%. New Hampshire and Rhode Island also come in at this level, with Delaware just one percentage point behind them.

States are benefitting from sportsbook taxes

Make no mistake – online sports betting is extremely big business, with the ability to generate some spectacular revenue streams! During 2020, even though in-person betting was pretty much out of the question for much of the year, due to the global pandemic, sportsbooks across the US managed to attract over $21 billion in sporting wagers. This is predicted to be just the tip of the iceberg, with analysts suggesting that these figures could rise exponentially as more and more states introduce sports betting apps by legalizing sports betting.

So what are all these states doing with the huge sums of money they’re raising from their sports betting taxes? Once again, every state is completely free to make its own decisions, but there seems to be a degree of consensus between many of them. Gambling revenues are being used to fund numerous initiatives designed to add value for state residents, with much of the income generated being put towards education. Money is also being made available for public services and for economic development, with the majority of betting-legal states diverting large sums of money towards responsible gambling initiatives.

Several states are also using the proceeds from sports gambling taxes to fund the arts. Colorado, Iowa and West Virginia are particularly involved in channeling additional funds into state-funded arts agencies, often providing them with the majority of their annual income.

More states are reviewing their stance on sports betting

Not surprisingly, once they’ve seen how much additional revenue can be generated from a tax on sports gambling winnings, more and more states are reconsidering their legal position regarding online wagering. And it’s definitely online sports betting that’s generating the bulk of the income for those states that allow the activity.

The returns from online sports betting seem to be much greater than for retail sportsbooks, probably because of the betting deals and convenience they offer. With no need to engage in a road trip before placing a sporting wager, bettors can gamble as and when they wish – and they’re seizing the option with both hands! For example, in May 2021 it was calculated that New Jersey derived over 90% of its sports betting income from online bettors. That’s serving as a powerful incentive for even more states to jump aboard the online sports betting train, so we expect to be expanding our list over the coming months!

Conclusion: keep checking back to discover the latest sports gambling tax info!

Here at PromoGuy, we strive to bring you the most relevant and up to date information we possibly can. We’re constantly looking out for changes in legislation that might affect sports betting taxes, and we publish new information just as soon as it becomes available. As we’ve already touched upon, things can change very quickly  when it comes to sports betting, and you can never be too careful when it comes to assessing your tax commitments, so check to make sure you fully understand your tax obligations.

We strongly recommend you bookmark this page and check back in throughout the year. We’ll help you keep track of your sports betting, explaining everything you need to know to stay safe and legal when you’re placing sporting wagers. We’ll keep you updated on all the latest sportsbook operators and bonuses too. So whether you need betting lines explained or a betting sites odds calculator, there’s always something new to discover across our site!

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Sportsbook taxes FAQ

⚽ Do I have to pay a sports gambling tax on my winnings?

If you want to avoid problems with the IRS, before you rush to claim sportsbook promotions, you need to be up to speed with the current gambling taxes across the US. Come and read our article to find out what’s required and how to work out whether you need to include sports betting winnings in your tax return. We’ve got the full details, right here, so come and take a look!

⛹ How do I know what sportsbook taxes I need to pay?

Tax laws are incredibly complex, but you need to understand your tax commitment to avoid running into problems with the IRS. We’ve got all the details you need to know, including how much each state expects to receive from your live betting sessions. Avoid unpleasant surprises at the end of the tax year by reading our sports taxation information today – you’ll be glad you took the time!

✋ Do you have to pay taxes on online sports betting wins in New York?

It’s not just the IRS who are interested in your sportsbook winnings – most states also tax successful sports bettors on their winnings too, so it’s important to understand how much you might owe. Come and check out our complete guide to sportsbook taxes today, so you can avoid potential problems tomorrow!

❓ Is there a sports betting tax in every state?

Every state throughout the US is free to decide whether to legalize online sports betting, and how much to charge in taxes if the answer is ‘yes’. Come and find out the situation in your state right now, and discover what you need to know to keep on the right side of the IRS too!

🏈 Do I have to notify the IRS about my sports betting wins?

Online gambling is still quite new, so there’s a lot to learn. But one thing no US citizen wants is to upset the IRS, so it’s essential to carry-out a sportsbook review and have your facts right when it comes to online sports betting. We’ve got the full details of the sports betting taxes in every state too, so come and check it out!

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