Nj Sports Gambling Tax

Over 145,000 online gambling accounts have been opened by consumers in New Jersey since its inception in late November. With the 2013 tax year now closed, it’s not too early to think about the tax implications for playing online in New Jersey. New Jersey Sports Betting Revenue NJ sports betting kicked off on June 14, 2018 with two retail sportsbooks in the state. That number quickly exploded and the market now boasts 17 sportsbook apps and 10 retail books at Atlantic City casinos and North Jersey racinos. State Sports Betting Tax Rate Arkansas 13-20% DC 10%; revenue minus expenses for state online lottery operations Delaware 50% Illinois 15% Indiana 9.5% Iowa 6.75% Mississippi 12% (8% state/4% local) Montana Collects revenue minus expenses State Sports Betting Tax Rate Nevada 6.75% New Jersey 9.75% in-person/14.25% online New Hampshire Not Yet.

New Jersey sports betting handle totaled more than $4.58 billion in 2019, and taxes on revenue won by the mobile and land-based sportsbook operators delivered over $36.5 million to state and local.

We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.

Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

This article was fact-checked by our editors and Christina Taylor, MBA, senior manager of tax operations for Credit Karma Tax®.

Betting on sports is part of the fun for many sports fans — even if their wagering hasn’t always been technically legal.

Until a May 2018 U.S. Supreme Court decision opened the door for every state to legalize sports betting, just four states allowed wagering on sports — Nevada, Delaware, Montana and Oregon. Legality, however, hasn’t stopped Americans from betting on sports. In fact, the American Gaming Association estimates that Americans spend more than $150 billion a year on illegal sports betting.

Since the Supreme Court’s ruling, New Jersey, Pennsylvania, West Virginia, Mississippi and Rhode Island have legalized sports betting. And other states are considering laws to permit wagering on sports.

But when you gamble on sports, it won’t matter to the IRS if your winnings came from a legal bet or from one that’s off the books. Your winnings are taxable income either way.

If you plan to do some wagering in a state that’s legalized sports betting, it’s important to understand how tax on your winnings will work. Let’s take a look at how the IRS treats gambling winnings of any kind.

Sports-betting winnings are taxable income

The big question for sports gamblers: Are your winnings taxable income? As we said above, the answer is yes.

“Gambling winnings are fully taxable and you must report the income on your tax return,” the IRS says. “Gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips.”

Although sports betting isn’t one of the examples, it’s still covered by “gambling winnings.”

Whether sports betting is legal in the state where you place your bet doesn’t matter to the IRS. If you win, you have taxable income, which should be reported when you file your tax return.

These rules apply only to casual sports bettors. If you’re a pro — “in the trade or business of gambling,” as the IRS puts it — different rules apply.

How much tax you’ll owe depends on your personal tax situation and tax bracket.

You might also owe state income tax on any money you win from betting on sports, depending on which state you live in. For example, Nevada doesn’t have a state income tax. But Maryland does, and it considers winnings from gambling taxable income. If you win money betting on sports, check with your state to see if it taxes gambling winnings.

Form W-2G: Evidence of your sports-betting win

So you win a couple thousand bucks betting on your favorite sports team. How will the IRS know if you don’t tell it? Well, whomever you won the money from — a casino, racetrack, etc. — is supposed to report your winnings to the IRS on Form W-2G. The form tells the IRS some important information, including …

• Contact information for the payer who awarded you the winnings, including phone number, address and federal tax identification number
• Your name, address and taxpayer identification number
• How much you won
• When you won it
• What kind of wager you made
• And how much, if any, federal and state income tax the payer withheld from your winnings

Generally, the payer has to report your winnings if …

• You won $1,200 or more from a bingo game or slot machine
• You raked in $1,500 or more at keno
• Your poker victory tops $5,000
• You won $600 or more and your winnings are at least 300 times the amount of your bet (bingo, slots, keno and poker are exceptions to this rule)
• The payor withheld federal income tax on the winnings

Penalties for not reporting sports-betting income

Of course, the IRS wants you to report all your taxable income, and if you don’t you could face penalties and interest on any tax you owed but didn’t pay.

Generally, the penalty for not paying income tax that you owe is 0.5% of the unpaid tax. That rate is assessed monthly until you pay the tax you owe. Unpaid tax and penalties typically accrue interest, too — 5% compounded daily from the due date of your tax return to the date when you actually pay in full the balance of any tax, penalties and interest you owe.

However, if you’re caught intentionally omitting income — like gambling winnings — from your tax return in order to avoid paying tax on that income, it could mean additional penalties. According to the tax code, trying to “evade or defeat” tax you owe on income you’re required to report could be a felony with fines of up to $100,000 for individuals or five years in prison. Plus, people convicted of tax evasion can be held responsible for the costs of prosecution.

Lose a sports bet? It might be deductible!

Just as sports-betting winnings are considered taxable income, losses may be tax-deductible if …

• You itemize your deductions
• You keep detailed records of your winnings and losses

“To deduct your losses, you must keep an accurate diary or similar record of your gambling winnings and losses and be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses,” the IRS says.

Any losses you deduct cannot exceed winnings that you report when you file your return. For example, if you reported winnings of $5,000, you could deduct losses only up to that amount. Additional losses would not be deductible. And if you lost $5,000 but didn’t win anything, you wouldn’t be able to deduct those losses at all.

If you’re eligible to deduct your sports-betting losses — or any other gambling losses — you’ll do so on Schedule A.

Bottom line

More than a quarter of Americans like to bet on football, 21% are interested in betting on baseball or basketball, and 20% would put some money down on a hockey game, according to Nielsen Sports. If you’re a fan of sports wagering, it’s important to understand that tax on sports betting is nothing new.

The IRS has always considered gambling winnings taxable income, and it expects you to report all your taxable income — even the money you win betting on sports.

If you’ll be reporting gambling winnings on your federal income tax return, or hoping to write off some gambling losses, be sure to keep detailed records of your wagers and losses.

Christina Taylor is senior manager of tax operations for Credit Karma Tax®. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She co-developed an online DIY tax-preparation product, serving as chief operating officer for seven years. She is the current treasurer of the National Association of Computerized Tax Processors and holds a bachelor’s in business administration/accounting from Baker College and an MBA from Meredith College. You can find her on LinkedIn.

Related Articles

Part of the fun of gambling is the suspense.

It wouldn’t be as exciting if you knew the outcome of your wagers ahead of time.

Another plus is that many types of gambling are legal in New Jersey. Casino gambling, horse racing, the state lottery, bingo and most recently, sports betting.

Gambling is even more fun when you win.

And, when you gamble at authorized NJ betting sites, you will be paid.

What you may not have given much thought to, though, is that NJ gambling winnings are taxable. Winnings obtained from illegal gambling applies here as well.

In this article, we will tell you everything you need to know about the federal and New Jersey state laws concerning gambling winnings and taxes.

Are NJ gambling winnings taxable?

According to the IRS, gambling winnings in any state, including New Jersey, “are fully taxable and you must report the income on your tax return. Gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips.”

The IRS doesn’t mention sports betting, but winnings therefrom also count as gambling winnings and are, thus, taxable.

How much are NJ gambling winnings taxed?

Whether you’re a New Jersey resident doesn’t have any bearing on your liability to pay federal and state taxes on your winnings.

So, this includes the total of your winnings, if any, that is withheld for state taxes.

However, the type of gambling and, whether the winnings are from a retail or online site, does matter.

Taxes on NJ state lottery winnings

Prior to 2009, NJ state lottery winnings were not taxable.

However, effective January 2009, New Jersey Lottery winnings in excess of $10,000 became subject to the state gross income tax.

The percentages withheld from the state lottery payouts of more than $10,000 are as follows.

If the payee provides a valid Taxpayer Identification Number (TIN):

• 5% of payouts of $10,001 to $500,000.
• 8% of payouts more than $500,000.

If the payee does not provide a valid TIN:

• All payouts of more than $10,000 are taxed at 8%.

Rules on shared and multiple lottery wins

If two or more people win a given lottery prize and split the proceeds, as long as the total prize exceeds $10,000, it is taxed.

Each recipient must, therefore, assume liability for his or her share of the taxes even if the individual’s share does not exceed $10,000.

Furthermore, if a person wins the NJ Lottery more than once in the same year, each win is considered separately in determining whether or not it is taxed.

For example, a person who wins the lottery twice in one year, once for $6,000 and once for $5,000, would not have to pay any state tax on those winnings.

However, a person with a single state lottery win of $11,000 would have 5% of that amount withheld for state taxes.

Federal and state taxes on other NJ gambling winnings

The state lottery is one form of gambling in New Jersey for which winnings are taxable.

In fact, gambling operators must report individual wins over a certain amount for some types of gambling to the IRS.

Federal tax form W2-G

All New Jersey-licensed gambling establishments, including casinos and racetracks, are required by federal law to report certain gambling winnings to the IRS on Form W2-G.

However, the minimum win for this to happen varies, depending on the type of gambling, as indicated below:

• Horse Racing: Winnings exceeding $600 on a $2 wager or 300x any larger amount wagered.
• Slot Machines and Bingo: Winnings (not reduced by the amount wagered) that exceed $1,200.
• Keno: Winnings (reduced by the amount wagered) that exceed $1,500.
• Poker Tournaments: Winnings (reduced by the amount of the buy-in) that are more than $5,000.

Amount withheld from winnings for federal and state taxes

In every such instance, the gambling establishment must file Form W2-G to report the win to the IRS and send a copy of the form to the payee.

Since winners need this info to prepare their tax returns, they will usually receive a copy of Form W2-G in January of the following year.

Typically, the gambling facility, where the win occurred, will withhold a certain amount of the gambler’s winnings for federal and state taxes.

Before 2018, the standard withholding amount for federal taxes was 25% for those who provided a valid TIN and 28% for those who didn’t.

However, starting in 2018, the withholding rate for federal taxes is now a uniform 24%.

The amount withheld for state taxes varies from state to state.

In New Jersey, it is only 3%. That is the tax rate regardless of whether you live in New Jersey or not as long as the reportable winning took place in New Jersey.

The winner’s responsibility

The gambling facility must file Form W2-G and withhold the appropriate tax from your winnings if it meets the specified criteria.

But whether it does so or not, you still need to report your net gambling winnings as income when you file your tax return.

Obviously, gamblers who win big will find it disappointing, in most instances, to have to fork over a sizable chunk to the government.

But here’s some other news that may help you.

Ultimately, the amount of tax you owe on your gambling winnings will depend on your taxable income bracket. And, if you itemize your deductions, the extent to which you could offset those winnings with documentable gambling losses.

How gambling losses can help offset winnings

Nj Sports Gambling Tax

You can deduct your gambling losses, but only to the extent of your winnings.

If you lost more money gambling than you won that year, you could only deduct losses up to the amount reported as winnings. You cannot report any amount above that.

In other words, you can’t report your gambling income as a negative amount.

However, you can combine your losses from different types of gambling.

For example, if you won a big jackpot on a slots machine, but lost money on other casino games, poker and sports betting, then those losses count.

On the flip side, due to the recent substantial increase in the allotted amount you can take on your tax return as a standard deduction, itemizing your deductions may not be more beneficial tax-wise after all.

Seeking the advice and services of a professional accountant could be a worthwhile investment.

Which tax forms should you use to report gambling wins and losses?

If you are a casual gambler and received Form W-2G, be sure to include the winnings on that form. Also, include any tax withheld and any other gambling winnings you are reporting for the year on Form 1040 as “Other Income.”

Then, if you itemize your deductions, enter any offsetting gambling losses on line 28 of Schedule A (Other Miscellaneous Deductions.)

If it turns out that you paid more in taxes than you should have on your gambling winnings, you will receive a refund.

However, if too little money was withheld or you have other gambling winnings to report, you could owe more money in taxes.

In fact, casinos are not required to issue a W2-G and withhold taxes for winnings at table games (blackjack, roulette, baccarat and craps).

However, casinos expect players to keep track of such wins and include them on their tax returns.

Nj Sports Betting Tax Revenue

The same applies to winnings from sports bets. You may be able to offset those wins, at least in part, with your gambling losses and other related expenses.

What happens if you receive a W-2G but don’t report the income on your tax return?

If you receive Form W-2G, whether money was withheld from your winnings or not, ignoring it is a mistake.

You need to file a tax return and show this income on the appropriate forms. If you don’t, the IRS will likely send you Form CP2000, which is a notice of underreported income.

Nj Sports Gambling Tax Brackets

You will be assessed additional taxes, penalties and interest on your unreported or underreported gambling winnings.

Nj Sports Betting Tax

NJ taxes on sports betting winnings

If you win money from sports betting, you must pay taxes on those winnings as you would on other forms of gambling.

Furthermore, if you win more than $5,000 from betting during the calendar year, the NJ casino or racetrack is required to file a W-2G with the IRS.

In fact, for anyone betting anonymously at a retail sportsbook, keeping accurate tabs on wins for a year seems impossible.

Of course, any betting that you do online or through a mobile app is tracked within your registered betting account. As a result, the gambling operator would have an accurate record of every transaction.

Sports betting winnings are subject to the same 24% federal tax rate as other gambling winnings.

The winners are also responsible for paying the applicable local taxes.

The current NJ tax rate is 8.5% for retail sportsbook wins and 13% for wins at online sportsbooks or on mobile apps.

Nj Online Sports Betting Tax

Whether or not the place where the winning occurs reports it to the IRS, keep in mind, these winnings are taxable income. Therefore, it is a gambler’s responsibility to report them and pay any associated taxes.

As with any type of gambling winnings, if you itemize your deductions on your tax return, you can deduct your documentable losses. However, your reported losses cannot exceed your reported winnings.

Taxpaying rules for professional gamblers

If gambling is the way you earn your living, different rules and guidelines apply in determining your tax liability.

So, if you are a professional poker player, blackjack player or sports bettor, proceeds from gambling are considered regular earned income from self-employment and taxed accordingly.

When filing your tax return, you must complete Schedule C, not Schedule A.

Here, you would name gambling as your business and deduct any gambling losses and other gambling-related costs as business expenses.

For example, you can deduct the cost of travel to a gambling facility, including the expenses associated with attending out-of-town gambling seminars and conferences. Also, you can deduct the costs for tournaments and handicapping contests.

You can also deduct the fees you paid for professional services, part of your internet bill and the cost of any materials purchased to help make you a better gambler.

Accurate record-keeping for all gamblers is a must

Regardless of the type of gambling and whether it is a profession or recreational activity, there are benefits to keeping a betting diary.

Every time you gamble, record the date, place, type of bets made, and amount won or lost. This information will help you identify the types of situations that are the most profitable for you as well as others you should avoid.

Also, if you are over-betting your bankroll and need to cut down, your records will show you that as well.

Furthermore, no one wins 100% of the time.

If you have reportable gambling winnings, you may be able to reduce your tax liability if you show that you have incurred significant losses.

Besides a gambling diary, other types of acceptable documentation include:

• Receipts
• Betting tickets
• Win-loss statements from gambling establishments