After a year off, March Madness is well underway. With the emergence of legal sports betting in some states, many Americans may not be aware of the reporting requirements when it comes to their winnings.
In prior years, most people were betting “off the books” and may be in for a surprise when their favorite team wins it all and they get a tax bill for their winnings. Unlike fantasy football, which has been deemed a “game of skill” March Madness brackets are considered gambling. Here are some things to keep in mind before you collect your payout.
- Now that gambling is legal in several states, it is more trackable than it has ever been.
- When winnings are reported, it increases adjustable gross income.
- Unless gambling professionally, losses cannot be netted. Winnings get reported as “other income” while losses would have to be itemized to be deducted.
- Different gambling activities have different thresholds for reporting to the IRS and different requirements for what needs to be reported.
- A payout of $1,200 automatically triggers a W2-G, and often gamblers believe the documentation requires reporting, but the reality is the reporting requirement is present after the first dollar is won.