True or False: You Have to Pay Taxes if You Win Your March Madness Office Pool
If you win money on this year's March Madness bracket, congratulations! But don't forget to tell the IRS.
It's that time every spring when co-workers, friends near and far, and online gamblers are closely following college basketball to see if they placed their bets on the right team (or just their favorite mascots). Recent data from the American Gaming Association shows 45 states and Washington, D.C., already have or are considering some form of legal sports betting, and March Madness is a popular time to try it out. Some 17% of American adults, or 45 million people, said they planned to bet a total of $3.1 billion on the 2022 NCAA Men’s Division I Basketball Tournament, according to a survey from the association.
But whether you're making a wager under the table, at work, on the internet, at a casino or elsewhere, Uncle Sam expects you to fork over taxes if you win. That's right: No matter how small, gambling winnings are considered taxable income.
"All gambling winnings are taxable,” Tim Gagnon, an associate professor of accounting at Northeastern University, told Acorns and CNBC's Grow last year. "It’s ordinary income — the same tax rate as your paycheck.”
If you're a non-professional gambler, here's what you need to know about your March Madness winnings come tax time.
How to pay taxes on March Madness winnings
If you gambled through a legitimate organization like DraftKings or FanDuel, it may send you a Form W-2G. Taxpayers are subject to W-2G reporting if they win $600 or more and at least 300 times the amount of their wager. (There are higher thresholds for other types of gambling, like slot machines and poker games, according to the IRS.)
If you won a prize instead of cash, yes, you still owe taxes if the prize was worth $600 or more. In that case, you should report what you won on Form 1099-MISC.
Even if you get your winnings under the table or you won less than $600 — meaning you may not receive a Form W-2G from the gambling facility — you still need to report that income to the IRS. You can do so via as "Other Income" on Form 1040.
Can you deduct your losses?
You can deduct your gambling losses up to the amount of your gambling winnings, but there's a catch. You must itemize your deductions, a method that has largely gone out of style since the Tax Cuts and Jobs Act took effect in 2018.
Tax preparer TurboTax gives the following example on its website: "If you had $10,000 in gambling winnings in 2021 and $5,000 in gambling losses, you would be able to deduct the $5,000 of losses if you itemize your tax deductions."
While your winnings may be reported via a Form W2-G, your losses may not be. In order to deduct your losses, the IRS says you must keep a record of your wins and losses, including documentation like receipts or tickets, that shows the amount of money you made or lost.
You can claim your losses (up to the amount of winnings) as "Other Itemized Deductions" on Schedule A (Form 1040).
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