As online sports betting rolls out in more states, people are encountering legalized gambling in new ways. Whether you're wagering on March Madness from your couch or flying to Las Vegas for a weekend at the tables, understanding the tax implications is key.
This year, there are also new rules to navigate. One of the quieter changes tucked into the "One Big, Beautiful Bill Act" (OBBBA) is a new way of reporting deductions on gambling income. In contrast to previous years, filers can now only write off 90% of their losses, which might mean a surprise tax bill for some in 2027.
Do you have to pay taxes on sports betting?
The IRS has clear-cut rules on gambling income that predate the recent explosion of the sports betting industry. In short, the proceeds from a successful sports wager are taxable income, just like your paycheck or capital gains from investment income.
"The U.S. tax code is very broad in how it defines what is taxable. Everything that you earn is taxable unless it is otherwise said not to be," says April Walker, lead manager for tax practice and ethics with the American Institute of CPAs.
While you can write off some gambling losses if you itemize, that deduction can't exceed the amount of your winnings.
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What is Form W-2G?
Gambling establishments, including digital operations such as online sportsbooks, usually provide you and the IRS with a record of your taxable winnings.
The statement is known as the W-2G, and it includes an overview of your gambling winnings, along with any withholding you elected when you gave the establishment your tax information.
Gambling businesses are required to report payouts they made that meet certain thresholds, according to the IRS. You'll likely receive one or more W-2G forms if you:
- Won $1,200 or more playing bingo or slots.
- Netted $1,500 or more from keno.
- Exceeded $5,000 in winnings from a poker tournament.
- Obtained $600 or more in another gambling endeavor, such as sports betting, and the payout was at least 300 times the amount you put on the line.
Businesses are typically required to send you Form W-2G by Jan. 31 of the following year. This year is a little different: Since Jan. 31 falls on a Saturday, the deadline was pushed to Feb. 2. Regardless, you should expect to receive your W-2G no later than mid-February.
» Questions on lottery taxes? Use our lottery tax calculator
Are all gambling winnings taxable?
It's worth noting that these requirements don't cover every potential situation in which you might win a bet. For instance, your winnings might be below these thresholds, but be mindful that you're supposed to pay taxes on anything you win. So if you get a W-2G, you can be sure the IRS knows about whatever the casino or sportsbook has listed there.
Similarly, the coworker who organized your office bracket pool is unlikely to send you and the IRS records of your participation.
How do you deduct gambling losses?
You can deduct gambling losses, but there are some important limitations to be aware of.
First, writing off your gambling losses requires that you itemize on your tax return. In practice, many taxpayers benefit more from taking the standard deduction, which is simpler and doesn't require tallying up individual expenses.
The second challenge is a rule change affecting 2026 gambling activity that you'll report on your 2027 return.
In the past, gamblers could generally deduct 100% of their losses up to the amount of their winnings, meaning that if you broke even, you typically didn’t owe taxes on your gambling activity. Beginning this year, a new provision in the OBBBA limits the deduction to 90% of gambling losses. That change could lead to an unexpected tax bill on what amounts to unrealized income.
For example, if you won $10,000 and lost $10,000, you would still owe taxes on $1,000 of income. That’s because you could deduct only $9,000 of your losses, even though you didn’t actually come out ahead overall.
Claiming gambling losses on your taxes
Another factor to consider when writing off gambling losses is that while a casino or sportsbook might send you a record of your gains, they're unlikely to break down what you lost. You'll need to keep your own records for these purposes, the IRS says.
"To deduct your losses, you must keep an accurate diary or similar record of your gambling winnings and losses and be able to provide receipts, tickets, statements, or other records that show the amount of both your winnings and losses," the agency says on its website.
It's a good idea to be vigilant with recordkeeping anyway. If you have documentation, you can ensure your information matches whatever records you might receive from a casino.
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How do state taxes treat gambling?
Sports betting is legal in 39 states and the District of Columbia, according to the American Gaming Association. If you have gambling winnings, it's worthwhile to understand the tax considerations in the state where you live and where you gambled.
While you're most likely to have to settle up with your home state, tax rates and reporting requirements vary widely across the U.S. There may be local taxes that businesses are required to withhold as well.
Even FanDuel, one of the country's leading online sports betting platforms, doesn't hazard a guess about how states or municipalities will handle gambling proceeds.
"It depends on the state," FanDuel says on its website, adding that it might have to submit tax information "to one or more state taxing authorities."
» Learn more: State taxes and how they work
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- 1.Internal Revenue Service. Instructions for Forms W-2G and 5754. Accessed Jan 29, 2024.
- 2.Internal Revenue Service. Topic no. 419, Gambling income and losses. Accessed Jan 29, 2024.
- 3.American Gaming Association. Interactive U.S. Map: Sports Betting. Accessed Jul 11, 2025.
- 4.FanDuel. Taxes with FanDuel Racing. Accessed Mar 22, 2024.
