Super Bowl bettors need all the breaks they can get. Those who will be licking their wounds after the big game will undoubtedly ask, “Will the IRS give me a tax break on my Super Bowl gambling losses?”
The IRS has an answer: Yes, but with caveats.
Sunday is a showdown between the Kansas City Chiefs and the Philadelphia Eagles, but it’s also showing off legalized gambling’s increasing reach across the country.
Currently, 33 states and the District of Columbia allow at least some type of legal sports wagering, according to the American Gaming Association.
People are projected to bet a record-breaking $1.1 billion soley via U.S. regulated sportsbooks — where people can watch and bet on major sporting events — during Super Bowl LVII, according to PlayUSA, a website covering the legalized gambling industry. That would sprint past the $950 million wagered last year, the site said.
The American Gaming Association estimates more than 50 million Americans will place Super Bowl bets for a combined $16 billion. The organization’s tally is also counting informal bets and pools among friends.
As more people get the chance to place a bet, they ought to know what the IRS says about legalized betting. Don’t expect the tax code to be a game changer for many returns, said Benjamin Bostic, principal at Boyer & Ritter in Camp Hill, Penn.
Between all the rules and considerations on what deductions to take, it’s likely “you’re just going to pay tax on your winnings and not deduct your losses,” he said.
First off, the IRS says “gambling winnings are fully taxable and you must report the income on your tax return.” That applies to proceeds including lotteries, raffles, horse races, hauls at a casino and more.
On the flip side, gambling losses can be deducted. But there’s two big twists.
First, a taxpayer would have to skip the standard deduction and instead itemize their deductions in order to access the gambling loss provision.
The sum of all the itemized deductions need to exceed the standard deduction amount in order for the move to make financial sense. Other itemized deductions include mortgage interest payments, medical expenses, state and local taxes and charitable contributions.
Most taxpayers take the standard deduction. Roughly 90% of last year’s tax returns filed through November took the standard deduction, IRS records show.
This year, the standard deduction is $13,850 for an individual and $27,700 for a married couple filing jointly.
Suppose it’s worth it for a taxpayer to itemize. The next rule is a gambling loss deduction is capped at the size of the winnings.
Apply that to Super Bowl LVII. As of Friday, the Eagles are favored to win by 1.5 points, according to DraftKings
So someone bets $200 on the Eagles. Then that person hedges it with a $100 wager on the Chiefs.
Turns out the Chiefs win on Sunday. (This is just a hypothetical, relax Philly fans.) The bettor won $100 and lost $200. The lRS would only permit a $100 gambling loss deduction. The rest cannot be carried forward or otherwise deducted, notes TurboTax
In the gambling context, the entity paying the winnings has to send along tax paperwork so the numbers can be reported on a return, the IRS said. For example, DraftKings has a section on its website about the relevant tax forms.
While win/loss statements are available on request, a DraftKings spokesman said “ultimately it’s up to the individual customer to handle their own personal tax matters.”
Bostic doesn’t think the gambling loss provision will play big for many people.
For what it’s worth, Bostic is a longtime Washington D.C. fan, but he’s rooting for Philadelphia in an office that’s packed with Eagles fans. “Go Birds,” he said.