Online sports betting.

Acmectec2001
Acmectec2001 Member Posts: 1 Newcomer
in Income

I have made small bets over the couse of the year. FANDUAL says that I won $2000. Most all of the beys were $1-$5. That $2k includes the bet amout plaus the win...ex. $1 bet pays $2, they say I won $3. Is this really the way the IRS taxes this? I know i can deduct losses if I itemize but I dont have enough deductions for that. Do I have to pay tax on the gross amount?

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  • Austyn
    Austyn FreeTaxUSA Agent Posts: 35 image
    Hi Acmectec2001,

    Yes, unfortunately this is how the IRS requires gambling winnings to be reported. You'll need to report the full $2,000 as income, even though that amount includes your original bet being returned to you. The reporting method—where a $1 bet that pays $2 is counted as $3 in winnings—is standard industry practice and aligns with IRS requirements.

    The challenge is that gambling losses can only be deducted if you itemize deductions on Schedule A, and they're limited to the amount of your winnings. Since you're taking the standard deduction, you won't be able to deduct any of your losses, which means you'll pay tax on the gross $2,000 amount.

    In FreeTaxUSA, if you received a W-2G you'll enter your winnings by navigating to Income > Uncommon Income > Gambling Winnings. If you did not receive a W-2G report it under Income > Other Income > Gambling Income (not on a W-2G)

    I'd recommend keeping detailed records of all your bets—dates, amounts wagered, and results—in case the IRS has any questions.

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