Last night was Selection Sunday and if you placed any bets, it is important to know when and how to report your winnings and losses on your taxes.  Notably, the rules discussed here apply to winnings not just from sports bets, but also lottery payouts, keno, sweepstakes, bingo games, raffles, poker and other games, casino winnings, and slot machines.  If you win a non-cash prize, such as a vacation or a vehicle, the winnings will be reported as the fair market value (FMV) of the non-cash prize.

One of the most important notes that readers should take from this article is that gambling income is not taxed like business income.  With business income, a taxpayer is generally taxed on their profit (i.e., the amount of revenue and gains that exceeds their expenses and losses).  With gambling, all eligible winnings are taxable, regardless of the amount of losses from gambling.  In fact, gambling winnings and losses are reported on different parts of the tax return.

How To Report Winnings From Gambling

A payer (e.g., sports book, casino, etc.) is required to issue the bettor a Form W-2G if the bettor receives a certain level of gambling winnings or otherwise receives winnings subject to the federal income tax withholding requirement.  The triggering conditions for a Form W-2G are if the bettor wins:

• $600 or more if the amount is at least 300 times the wager (the payer has the option to reduce the winnings by the wager)
• $1,200 or more (before wager reduction) in winnings from slot machines or bingo games
• $1,500 or more in winnings (after wager reduction) from keno
• More than $5,000 in winnings (after a reduction from the wager or, if applicable, the buy-in) from a poker tournament, or
• Any winnings subject to the federal income tax withholding requirement

If the bettor's winnings are reported on a Form W-2G, federal taxes will be withheld at a flat rate of 24%.  If the bettor does not provide the payer with a tax ID number (usually the Social Security Number), the payer will automatically apply a withholding rate of 24%.

The federal income tax withholding requirement occurs when the winnings, less the bet, are more than $5,000 from sweepstakes, wagering pools, or lotteries AND at least 300 times the amount of the bet.  More information about withholding taxes from gambling winnings can be found in IRS Publication 505.

If, for whatever reason, the bettor does not receive a Form W-2G, the bettor still needs to include their winnings on their tax return.

Regardless of these withholding requirements or lack thereof, a bettor must report all winnings from gambling on Form 1040 or Form 1040-SR (using Schedule 1).  Winnings will be taxed on the bettor's marginal income tax bracket, which will range from 10% to 37% at the federal level plus the bettor's state income tax rate.  In North Carolina for 2025, the state income tax rate is 4.25%.

How To Report Losses From Gambling

While it might seem like a bettor can treat gambling like a business since gambling losses, like business expenses and business losses, can be deductible, applying the rules are a little more complex than that generalization.  Gambling losses can only be deducted if the bettor itemizes (i.e., chooses to utilize below-the-line deductions instead of taking the standard deduction).  For reference, about 90% of taxpayers itemize on their tax returns.

The standard deduction in 2024 for individuals was $14,600 and $29,200 for married couples filing jointly.  In other words, assuming no other below-the-line deductions, a bettor who files as an individual would have to lose more than $14,600 from gambling activities to be better off itemizing as opposed to taking the standard deduction.  For a married couple, the bettor would have to lose more than $29,200 from gambling activities to be better off itemizing as opposed to taking the standard deduction.

For bettors who do wish to itemize their gambling losses, the bettor can only itemize losses up to the amount of their winnings - meaning that if the bettor won $1,000 on a bet in the Sweet 16, and lost $10,000 on a bet in the Elite 8, the bettor can only deduct $1,000 on their taxes.  Any such losses should be reported on "Other Itemized Deductions."

One last note on deductions from gambling losses - North Carolina does not currently permit such a deduction on state tax returns.  So, for North Carolina residents, state income taxes will be levied on winnings from gambling without any deductions for losses from gambling.

Recordkeeping

Importantly, the IRS requires bettors to keep an accurate diary (or similar record) of their winnings and losses from gambling.  In that record, the IRS requires the following information:

• Date and type of specific wager or wagering activity
• Name and address or location of the gambling establishment
• Names of other people present with the bettor at the gambling establishment
• Amounts that were won
• Amounts that were lost

To establish the amounts that were won and lost, there should be supporting documentation which can include the Form W-2G, Form 5754 (outlining statements by person who received money through gambling), wager tickets, cancelled checks, substitute checks, credit records, bank withdrawals, statements of winnings by payer, or payment slips provided to the bettor by payer.

On Pages 10-11 of IRS Publication 529, the IRS provides more specific details on recordkeeping requirements for different types of games (i.e., keno, slot machines, table games, bingo, races, and lotteries).

Disclaimer

This content is for informational purposes only.  Neither NC State University nor this Author endorse, encourage, or promote gambling in any form.  Gambling can be addictive and may lead to financial and emotional distress.  If you or someone you know is struggling with a gambling problem, seek professional help immediately.

Getting Help: If you or a loved one is experiencing gambling-related issues, resources are available:

• National Problem Gambling Helpline: Call or text 1-800-GAMBLER (1-800-426-2537) for confidential support.
• North Carolina Problem Gambling Program: Call at 877-718-5543, or text "MoreThanAGameNC" to 53342.  The link also provides a chat line and email address for support inquiries.