So, you’ve hit the jackpot with your sports bets—congratulations! Whether you’re betting on your favorite team or analyzing stats like a pro, winning feels amazing. But before you get too comfortable dreaming about what to do with your earnings, let’s talk about an often-overlooked aspect of sports betting: taxes. Yes, you might have to send a piece of your big win to the IRS.

Don’t worry—this guide is here to help you understand how to handle gambling winnings and maybe even keep more of your winnings in your pocket.

Rule #1: All wins are taxable

Here’s the first thing you need to know: all gambling winnings are taxable. Whether it’s a $5 parlay win or a $50,000 jackpot, the IRS considers it taxable income.

Sportsbooks, casinos, and even your favorite online betting apps report certain winnings directly to the IRS. If your win is large enough (more than $600 or 300 times your original wager for most bets), they’ll issue you a Form W-2G or a 1099-MISC to document the earnings. But don’t think you’re off the hook if you don’t get a form! IRS rules require you to report smaller amounts on your tax return, too.

Rule #2: Gambling winnings are taxed as ordinary income

Gambling winnings are taxed as ordinary income—meaning you pay the same rate on gambling winnings as you do on other types of income, like your salary or income from a business.

The bad news? If you’re lucky enough to win big, that additional income could push you into a higher tax bracket. For federal taxes, tax brackets range from 10% to 37%, depending on your total income. And don’t forget state taxes! Some states also take a cut of your winnings, so check the rules where you live (or where you placed the bet).

Rule #3. You may not be able to deduct gambling losses

Let’s face it—sports betting is full of highs and lows. One weekend, you’re on top of the world; the next, you wonder why you bet on that long shot.

While you may be able to use gambling losses to offset your taxable wins, it’s not available to everyone.

How (and whether) you deduct losses depends on the type of gambler you are. If you qualify as a professional gambler, you can get wins and losses on Schedule C and deduct other business-type expenses like travel, educational materials, and computer-related expenses.

The IRS doesn’t offer a black-and-white definition of who qualifies as a professional gambler, but you generally have to:

• Gamble regularly with the intent to make a profit
• Maintain separate business bank accounts and credit cards for your gambling activity
• Keep detailed records of all gambling activities, expenses, wins, and losses
• Haver the skill and expertise to gamble at a professional level
• Spend considerable time working to improve your gambling strategy

Most people fall into the casual gambler category, and in that case, they have to itemize to deduct gambling losses. The problem is that roughly 90% of taxpayers claim the standard deduction rather than itemizing because they don’t have enough itemized deductions to make it worthwhile.

If you claim the standard deduction, the IRS treats your gambling losses as a personal expense—they’re not deductible at all.

If you itemize, you can only deduct gambling losses up to the amount of gambling winnings. In other words, you can’t report a net loss from gambling.

Rule #4: You must document your gambling losses

If you’re one of the lucky few who can deduct gambling losses, the IRS expects you to keep detailed records.

Here’s what to track:

• Date of the bet
• Amount wagered
• Amount won or lost
• The type of bet (moneyline, spread, etc.)
• Location (or app) where you placed the bet

Many sportsbooks, casinos, and apps offer the ability to track your wins and losses, but it’s a good idea to keep your own records. If the IRS selects your tax return for an audit and you don’t have documentation, it could deny your deduction.

Rule #5: You can’t net transactions for the same session

Say you spend Sunday betting on games. Can you lump all those bets together and just report your net winnings for the day? The IRS says no.

This is called netting transactions, and the IRS specifically disallows it. You need to report each wagering transaction separately.

Rule #6: You may have to pay estimated taxes

If your gambling winnings are substantial, you may want to have federal and state taxes withheld from your winnings or make estimated tax payments throughout the year.

The U.S. has a “pay as you go” tax system, meaning the IRS requires taxpayers to make payments throughout the year as they earn income rather than paying a lump sum when they file returns.

Estimated payments prevent surprises at tax time and keep penalties at bay. A good rule of thumb is to set aside 24%-30% of your winnings for federal taxes (and more if your state collects income tax).

If you win over $5,000 on one bet (or more than 300 times your wager), the IRS requires casinos and sportsbooks to withhold at least 24% of your winnings before you cash out.

You can also choose to have taxes withheld from your winnings voluntarily. The payer usually asks whether you’d like them to withhold taxes before sending you the payout.

Just keep in mind that the 24% withholding is simply the default rate. It might not be enough to cover your tax liability if you’re a high-income taxpayer.

Get help with taxes on sports betting

Managing taxes on gambling winnings doesn’t have to feel like losing your biggest bet. It helps to stay organized and keep all receipts, statements, and records of your bets. If you’re having trouble staying on top of your documentation or figuring out how to report gambling winnings on your return, contact NewWay Accounting. We can help you navigate the often tricky tax rules and ensure you’re not leaving money on the table (or owing more than you need to).

Sports betting is exciting, but managing your taxes doesn’t have to be a buzzkill. With a little preparation and good record-keeping, you can enjoy your winnings without worrying about tax season surprises.