Friday, May 14

Betting on the Super Bowl? The IRS will want a piece of your winnings

Generally speaking, if you win more than $5,000 and the amount is 300 times the original bet, the payor is required to withhold 24 percent of your winnings for federal taxes. There could be instances, however, that trigger withholding when your win is under that threshold.

And, your final tax bill could be higher or lower than the amount withheld, depending on your other income and a variety of other factors. And even if no tax is withheld, you’re not off the hook for claiming the income on your tax return.

One way to reduce what you owe on your winnings is to write off your gambling losses. Of course, you’d need to be able to back up your claims with documentation.

“People don’t often think about keeping track of their losses,” Luscombe said. “They just lose, walk away, and then they finally win and have no records to offset it with losses.”

Additionally, you can only take a deduction for any gambling losses if you itemize your deductions on your tax return. The majority of taxpayers are not itemizers because they’re financially better off with the standard deduction, which was nearly doubled under new tax law that took effect in 2018.

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And, even if you do itemize, you cannot claim losses in excess of your actual winnings, said Andrew Whalen, CEO of Whalen Financial in Las Vegas.

And, he said, if you win $10,000 or more, the casino likely will require you to fill out a government form intended to prevent anti-money laundering.

Then there’s a W-2G that the casino might or might not send you, depending on how much you win. For sports betting — which is treated differently, from a tax standpoint, than some other forms of gambling — you should receive one if you win at least $600 and, again, at least 300 times the original bet.

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