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| Happy Super Bowl Sunday, Daily Money readers. |
| With 33 states and Washington, D.C. now offering live, legal sports betting markets, a record 50 million Americans are expected to wage $16 billion on the big game – more than double last year's estimates, the American Gambling Association forecasts. |
| But many of those bettors may not realize their winnings are taxable income. |
| However much you make betting on the Kansas City Chiefs or the Philadelphia Eagles, the winnings you take home need to be reported on your tax return. |
| "The gambling income is included with your regular income. So if you're in the 10% bracket, you would just pay 10%, plus the state," said Ray Kondler, certified public accountant and managing shareholder at Kondler & Associates in Las Vegas. "It's not taxed like a stock gain, it's taxed as ordinary income." |
Do you pay taxes on sports betting? |
| Gambling winnings typically must be reported on the "other income" line on form 1040, according to the IRS. |
| Depending on how successful you are with your bets, sports betting has the potential to boost you to another tax bracket. That means if an individual who makes $35,000 wins $10,000 on a bet, they may be taxed for a total income of $45,000. |
| "You might be in the same tax bracket, you might not. It depends on marital status" and other factors, said Russ Fox, an enrolled agent with Clayton Financial and Tax in Las Vegas. |
| Gambling losses can be deducted up to the amount of winnings. For non-professional gamblers, the deductions must be itemized. |
What is the W-2G threshold for sports betting? |
| There are certain wins that sports betting companies must report to the IRS on a form W-2G that will trigger an automatic tax withholding, but these bets must meet very specific conditions. |
| If the proceeds (the winnings minus the wager) are more than $5,000 on a bet with odds of at least 300-1, then there is automatically a 24% withholding to the IRS for federal income tax. |
| If the proceeds are between $600 and $5,000 and the bet has odds of at least 300-1, a "backup withholding" will be triggered if the winner did not provide a taxpayer identification number (such as a social security number). |
| Fox noted that this does apply to some Super Bowl bets, but it's rare. |
| "Our practice focuses on professional gamblers," he said. "For sports betting, we see probably less than 10 W-2Gs a year. It's extremely rare to see a W-2G for sports betting." |
How do I keep track of my sports betting wins? |
| Because most sportsbooks and sports betting apps don't hand out tax documents for each bet wagered, Kondler said it can be difficult for gamblers to keep track of wins and losses. |
| Bettors should be tracking their wins and losses. If they haven't been keeping a perfect record, Kondler suggests bettors "at least do a best-guess estimate" of their gambling income on their tax return. |
What about state income tax? |
| As for state and local taxes on gambling, that all depends on where you live, what type of bet you place and where you placed the bet, according to Andy Phillips, director of the tax institute at H&R Block. |
| "In the event you are subject to tax in the state where you placed the bet and the state where you live, you may be able to claim a credit for taxes paid to another state on your resident state tax return to prevent double taxation of the same income," Phillips said in an emailed statement. |
| You can follow USA TODAY reporter Bailey Schulz on Twitter @bailey_schulz and subscribe to our free Daily Money newsletter here for personal finance tips and business news every Monday through Friday. |
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