You Scored With an Online Sports Bet. Do You Owe Taxes?

[question everything]

Here’s a good bet: Millions of fans of online sports gambling have no idea they’re racking up big tax bills on their wagers—at least as the Internal Revenue Service sees it. Sports betting has exploded since 2018, when the Supreme Court struck down a national ban, and it’s now legal in 37 states and the District of Columbia. In 2022, legal sports wagers totaled $93.2 billion versus $6.6 billion in 2018, and they account for about 15% of commercial gambling revenues.

(snip)

While the phone apps have made sports bets easy and fun, the taxes on them are not. A key change in the law plus other factors have combined to make taxes on online sports betting both unfavorable and murky. (This is generally true for casino gambling as well.) These problems needn’t concern most casual bettors who wager a couple of times a year, but they matter for fans who bet frequently or have a big win.

(snip)

Here’s where things stand. Gambling winnings are taxable at ordinary income rates, and they’re reported on Line 8b of Schedule 1 of the 1040 form unless the filer qualifies as a professional gambler, which is hard to do. For nonprofessionals—think most online bettors—losses are deductible up to the amount of their winnings. So if someone wins $700 and loses $750, then $700 of losses are deductible.

There’s a big catch: Gambling losses are an itemized deduction on Schedule A, along with deductions for mortgage interest, state and local taxes and other items. But the 2017 tax overhaul greatly increased the standard deduction taxpayers get if they don’t itemize, so only about 10% of filers now itemize compared with about 30% before. The upshot is that millions of non-itemizers won’t get a specific deduction for their gambling losses, while their winnings remain fully taxable.

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[MichMan]

2. The 2017 tax change to increase the standard deduction was very beneficial to a lot of taxpayers

including lots of lower and middle income people like myself that don't itemize. Per the OP that would be 90% of all tax filers.

That does mean that gambling losses aren't deductible then, but people can always forego the standard deduction any given year.

[progree]

3. The standard deduction increase, was, unfortunately accompanied by the personal and

dependent exemptions being eliminated (edit -- these exemptions are something both itemizers and non-itemizers benefited from equally, so they aren't just something that itemizers benefited from /End edit). The loss of these exemptions almost offset what most people gained from the standard deduction increase.

It used to be that that the amount of untaxed income was the sum of the exemptions plus deductions (the latter being the higher of itemized deductions or the standard deduction)

Now, the amount of untaxed income is just the deductions (again being the higher of itemized deductions or the standard deduction).

Also, the Trump tax "cuts" have tax bracket and standard deduction increasing according to the chained CPI, rather than the CPI (which is higher). That results in a considerable increase in taxes over the years compared to using the regular CPI. And that clever little change is permanent -- it doesn't go away at the end of 2025 unlike most of the other Trump changes affecting personal income taxes.

[MichMan]

4. Well mine went down significantly

60 plus years old and married with no dependents and no mortgage

[progree]

5. And mine went up.

I added a bit to the previous post about the 2017 tax "cuts" adjusting for the chained CPI which will cause bracket creep and higher taxes as the years grind on.