The much-debated tax plan passed by Congress in December will impact every American—including gamblers.
Most states now have some form of legalized gambling, and every state has gamblers who play online or travel to bet—and although more people have gambling gains and losses, not all of them are keeping proper records to report those totals to the IRS.
Tax attorney Robert E. McKenzie says that CPAs, finance and accounting pros, accounting and tax firms and law firms dealing with tax issues need to be aware of things like casino reporting requirements, taxpayer record keeping requirements, reporting rules for gambling wins and losses, and how to defend clients in an IRS gambling exam. He covers those bases and more in a conference for Eli Financial, “Gambling and Taxes: The Price of Winning.”
Gamblers Get a Boost
Currently, players can deduct gambling losses up to the amount of any gambling income during the year. But among the changes in the Republican tax plan, noted the New York Times, are clarifications to loss reporting.
Under the new plan, “The bill clarifies that people (including many professional gamblers) who also deduct wagering expenses, such as the cost of travel to and from a casino, must add those expenses to their total losses before comparing that sum to their total taxable winnings for the purpose of making the overall deduction calculation.”
This clarification, the paper added, does not apply to gambling-incurred expenses past 2025.
More Changes Could Boost Purses and Help Tracks
More changes for gamblers could mean more money is available for betting. The Treasury Department and the Internal Revenue Service (IRS) announced in October that rules pertaining to declaring wins from gambling were being changed, as are rules about what taxes are taken out on the spot.
If payouts are 300-1 or more, taxes are taken out where they are won—at a track, an off-track betting location, or with advance-deposit wagering. Payouts are reduced by 25 percent.
“Previously the odds were calculated off the one winning ticket, regardless of how much you bet on the race,” reported the Los Angeles Times. “Now, and this is huge for gamblers, it’s your total bet on that wager in the race that is used for the calculation.”
The changes, one gambling website partner said, will keep more money in circulation and help tracks and horse owners. They would also not result in tax dollars being lost, the paper said, since most bettors only report gambling winnings they sign for.
The move was heralded by racing fans. “No longer will the withholding be based on the winning bet, but instead all wagers made into a given pool,” said the website Thoroughbred Racing Commentary. “This change could result in a decrease [of] the number of winning wagers that require tax withholding at the track by 90 percent or more.”
Is an End in Sight for the Federal Betting Handle Tax?
Efforts are also afoot to repeal the federal tax on sports betting handle—the 10-percent tax on total money wagered.
Rep. Dina Titus (D-Nevada) has called for a repeal of the tax, noting in a letter to House and Senate leaders that the “tax has sucked money out of Nevada without ensuring the state receives the benefits outlined by Congress.”
Titus said that repeal could keep $10 million annually in Nevada, that the IRS is not tracking the tax, and that offshore black-market betting sites are not paying the tax.
“Getting rid of the federal handle tax would ease concerns of operators looking to offer sports betting in other states,” noted Legal Sports Report. “The tax eats heavily into their bottom lines.”
The Titus proposal came too late to be included in the Republican tax bill.
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