If you are a basketball fan, March Madness is the year’s biggest tournament. This epic tournament involves brackets, betting, the thrill of victory, and the agony of defeat.
According to the American Gaming Association, there was an estimated $10 billion bet on March Madness in 2018. Only about 3% of this was legal. If you are among the 24 million people participating in NCAA college basketball bracket pools, then you should know the tax implications.
Is sports betting legal in my state?
In 2018, the PASPA bill that made sports betting illegal across the U.S. was ruled unconstitutional. Since this ruling, states have written laws surrounding this style of gaming. Today, most states have legislation allowing online or in-person sports betting.
Visit your State’s Department of Revenue for the most current legislation on sports betting for the upcoming March Madness tournament.
Do I have to report my winnings to the IRS?
According to the Internal Revenue Code, you must report the total amount of your gambling winnings as income. That’s right – report any amount, whether it is $5 or $5,000, on Form 1040.
Do I have to report my losses to the IRS?
Your annual gambling losses are deductible (use Form 1040, Schedule A) as long as they don’t exceed your winnings. Take note: you can’t reduce your winnings by subtracting your losses and reporting the difference. Read more about reporting gambling winnings and losses.
What information do I need to report my gambling winnings/losses?
The IRS requires you to keep an accurate diary or similar record of losses and winnings. It must include the following:
- Date and type of your specific wager or wagering activity
- Name and address or location of the gambling establishment
- Names of other people present with you at the gambling establishment
- Amount won or lost
You must also have documentation proving your winnings and losses. In most cases, Form W-2G, Form 5754, wagering tickets, payment slips, or other transaction documents are suitable. Even if you don’t receive a form reporting your winnings, you are still required to report it.
This article was last updated on October 26, 2022.