Gambling, as a whole, is a lucrative means to earn money. Nearly everyone, at one point of their lives, have engaged in gambling, whether it’s some small time wager amongst friends, to playing the slots or playing it big time at the tables of Las Vegas.

Sports betting taxes, along with other forms of gambling, are being taxed by the government and are one of the highest grossing industries generating federal and state income. The Federal Government imposes the highest taxes on gambling winnings at the highest rates as permitted by law. It is one way of keeping peoples urge to gamble under check and dissuading them from getting addicted to gambling.

Gambling has become such an enormous business that the IRS receives nearly four million Forms W-2G and 5754 each year. In the casinos of Las Vegas where most of sport betting takes place, sport betting taxes are frequently collected by members of the IRS. Sports betting taxes are withheld from the total winnings thus the federal government is ensured that the taxes are collected even if the winner fails to file the necessary paperwork.

The federal government imposes taxes for sports betting winnings in different methods, depending on the nationality of the gambler. For a foreigner who does not reside in the United States, the withholding tax rate is 30%. To illustrate this, here’s an example: a Taiwanese tourist wins at a sports betting for the Super Bowl at the casino in Las Vegas. The total winnings are $1,000 however, that person will only receive $700 because the casino immediately withholds $300 from the total prize money which will be remitted to the IRS.

The withholding tax rate for resident aliens and U.S. citizens is different from that of a non resident. For them, the tax rate is 28%. Although the rate seems more favorable for residents and citizens, they would still have to declare their winnings in their annual income tax return and still get taxed based on which income tax bracket they fall under.

Although this seems quite unfair and seem like they are taxed twice for one source of income, the federal government sees this in a different light. The ability to engage in gambling is a privilege and not everyone has the capability or the means to do so. And when one engages in such activities, it is therefore understood that the government has the right to collect taxes on the winnings. And the winnings from sports betting become part of income for which income taxes are collected therefore; the federal government deserves a right to collect taxes from it as well.

There is however, a provision for sports betting losses. The law permits players to take gambling losses off their taxes, but only to up to the amounts of their winnings. To further illustrate this: say you won $10,000 in a sports betting for the NBA Finals, however, you have incurred a loss of up to $3,000 in the process. The IRS allows you to deduct $3,000 off the $10,000 winning and no more than that. You will then only have to pay gambling taxes for $7,000 instead of $10,000. The player, however, needs to provide proof their losses in order to take gambling losses off their taxes.

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Category: Recreation
Keywords: sports betting,betting taxes,sports betting taxes