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Total wagers on the game were expected to be valued around $6 billion, according to the American Gaming Association, while more than 22 million people were expected to place money on a proposition bet – a novelty or side wager not related to the game’s ultimate outcome.
Fans had the opportunity to bet on nearly everything during the big game, from the length of the national anthem to which brand would snag the first commercial spot to what color sports drink would be poured on the winning team’s coach.
However, for those who won prizes, the Internal Revenue Service may lay claim to some of those winnings. For casual gamblers – those who aren’t in the trade or business of gambling – winnings are “fully taxable” and must be reported as income on your return, per the IRS. Gambling winnings include everything from raffles to horse races to the lottery.
Income tax is withheld at a flat rate of 24 percent from certain kinds of winnings. A prize worth more than $5,000 from any sweepstakes, wagering pool or lottery is subject to income tax withholding, as is any other wager where proceeds are equal to at least 300 times the bet amount. Exclusions generally include bingo and slot machine winnings.
All winnings should be reported as “other income.”
On the other hand, for all those big Super Bowl bet busts, losings can be deducted in some circumstances, but only for those who itemize their deductions (which fewer people are expected to do under the new tax law). The amount of losses claimed under “other itemized deductions,” however, cannot exceed the amount of gambling income reported on your return.
Rams fans were expected to have lost nearly $4 million in Super Bowl bets this weekend.
In order to get tax credit for those losses, the IRS also requires accurate recordkeeping – including receipts, tickets, statements or other documents detailing both winnings and losses.
A number of states have legalized sports betting following a May Supreme Court decision that struck down a federal ban. At some regulated venues, the payor will give you a tax form to fill out for your prize.