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Sports Betting Tax in 2021 – Can You Be Taxed on Sports Betting Winnings?

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When you’re busy placing bets, the last thing you’re thinking about is tax on sports betting. However, if you win money, you will be expected to pay federal income tax on your winnings, providing you meet specific requirements. What’s more, you’ll also often be asked to pay sports betting tax on a state level, taking even more money away from your winnings.

On this page, we’ll be taking a close look at sports betting tax across the United States, showing you how much to pay and, perhaps more importantly, how you can legally reduce your tax bill. We’ll even be looking at whether you can altogether avoid paying taxes on your sports betting winnings by joining up with offshore sports betting sites.

Paying Tax on Sports Betting – Sports Betting Tax Rates

Unfortunately, gamblers throughout the US are expected to pay federal income tax on all winnings. The amount you end up paying in federal taxes depends on how much you earn throughout the year. There are seven federal income tax brackets, and we’ve listed them below.

Amount Earned Flat Tax Tax Percentage
$9,950 N/A 10%
$9,951 to $40,525 $995 12% of everything earned over $9,950
$40,526 to $86,374 $4,664 22% of everything earned over $40,525
 $86,376 to $164,925 $14,751 24% of everything earned over $86,375
$164,926 to $209,425 $33,603 32% of everything earned over $164,925
$209,426 to $523,600 $47,843 35% of everything earned over $209,425
$523,601+ $157,804.25 37% of everything earned over $523,600

Individual states will also usually tax winnings themselves, although the amount they tax is much less than that charged by the federal government. The state where the bet was placed usually charges the tax, not the state where the gambler resides. The amount of tax you pay to a state usually depends on your overall annual earnings and marital status.

Sportsbooks are expected to withhold 24% of net winnings when there’s a substantial payout, which is classed as over $5,000 with winnings are at least 300x your wager. This is for federal income tax. However, you might find that this is not enough when the end of the year comes around, as you’ve earned more than $164,925. If this is the case, you’ll be required to pay extra. If the 24% is more than you should have paid, you’ll receive a rebate. Some states will also withhold money for state taxes when also withholding money for federal taxes.

When the payer withholds a percentage of a gambler’s winnings to pay federal income tax, they will issue the gambler with Form W-2G, which shows how much income tax has been withheld. This form will also be sent to the IRS. This form will also be issued when there’s a win of $600, which is also equal to or greater than 300x the bet, but no tax will be withheld until the $5,000 threshold is reached.

It’s important to mention that tax will need to be paid on any money you win, even if the amount won doesn’t meet the threshold to have money withheld and Form W-2G issued. Anyone winning less than the requirement for tax to be withheld should report their winnings as “other income” on Form 1040, which is the standard document used when filing income tax returns with the IRS.

Is There Tax on Sports Betting?

In some countries around the world, such as the United Kingdom, there is no tax on sports betting. However, this is not the case in the United States, where anyone winning money will be expected to declare it as income. Don’t make the common mistake of thinking that only sums over a certain amount need to be reported, as everything, from wins of a few dollars to wins worth thousands, must be declared.

Different winners will pay different amounts of tax. This is because the amount of tax you pay to the federal government depends on how much you earn over the course of the year – it can be anything from 10% of your winnings to 37% of your winnings. Different states also have different state income taxes that will need to be paid. Some states have a flat income tax rate for everyone, while others have various tax brackets with differing tax rates.

How Much Tax Do You Pay on Sports Betting?

Yes, you are required to pay tax on sports betting winnings. The exact amount depends on where you’re gambling, as different states have different tax rates. However, regardless of where they are in the US, everyone must pay federal tax on gambling winnings.

It should be noted that you are also allowed to deduct gambling losses from your tax return, providing you itemize your records. Doing so can make a massive difference to the size of your tax bill, especially if you are a regular gambler. However, most people in the US filing tax returns take standard deduction, meaning gambling losses can’t be claimed.

Do You Have to Pay Tax on Sports Betting?

This is where things get a little gray. Legally speaking, anyone who wins money from gambling should declare their winnings and pay tax on them. However, what do you do if you’re playing at a gambling site in a state where online gambling is yet to be legalized? Do you want to be admitting to gambling when the law is not clear on the legality of it?

Even when you play at the best sportsbooks in the US, the onus is entirely on you to report and pay tax on the money you win – the site itself will not inform the IRS of any substantial wins, so the IRS will have no knowledge of you winning money. So, you could choose to withhold information of your winnings from the IRS and therefore not pay any tax on your winnings. You must decide whether you want to take the risk of not reporting any winnings.

Sports Betting Tax Rates

Before we look at the betting tax rates of various states, it’s worth reiterating this: regardless of where you are, there will be a tax on winnings charged by the federal government. Whether you win thousands in a Vegas sportsbook or a few dollars online at a Tennessee online casino, it’s up to you to report your winnings. The amount of tax you end up paying to the federal government depends on your overall annual income.

But do you have to pay tax on sports betting winnings on a state level? The answer is: it depends. Each state chooses whether to levy a betting tax on players, plus they also get to choose the tax rate on sports betting. Below, you can find out about the state betting tax you’re expected to pay in some of the more prominent states with legal sports betting.

Arizona Sports Betting Tax Rate

As with many other states, the Arizona betting tax rate depends on your annual earnings. The Arizona tax brackets are listed below.

  • Income up to $26,500 is taxed at 2.59%.
  • Income of $26,501 to $53,000 is taxed at 3.34%.
  • Income of $53,001 to $159,000 is taxed at 4.15%.
  • Income of over $159,000 is taxed at 4.50%.

As with all other states, a federal income tax of 24% is withheld whenever anyone wins a substantial amount.

Colorado Sports Betting Tax Rate

If you manage to win money while betting in the Centennial State, you’ll be expected to pay state betting tax of 4.63%. The Colorado sports betting tax is a flat rate, so it remains the same for everyone lucky enough to win money. This flat tax rate replaced a tiered system, whereby higher earners paid higher tax on the money they’d won via gambling. Local income tax must also be paid by those living in Denver, Aurora, Sheridan, Glendale and Greenwood Village, although these are flat amounts payable by everyone. For example, everyone in Denver is required to pay $5.75 per month.

Connecticut Betting Tax Rate

While many other states have flat tax rates, those winning money in Connecticut will pay at different rates depending on their overall income for the year. There are seven brackets, which are detailed below.

  • Income of $10,000 or less in a year is taxed at 3%.
  • Income of $10,001 to $50,000 is taxed at 5%.
  • Income of $50,001 to $100,000 is taxed at 5.5%.
  • Income of $100,001 to $200,000 is taxed at 6%.
  • Income of $200,001 to $250,000 is taxed at 6.5%.
  • Income of $250,001 to $500,000 is taxed at 6.9%.
  • Income of over $500,000 is taxed at 6.99%.

The maximum rate of tax will be withheld for those winning more than $5,000 and equal to or greater than 300x their bet. Those not residents in Connecticut will not be required to pay the Connecticut betting tax.

Florida Sports Betting Tax Rate

If you manage to win some money while betting on sport in Florida, there’s great news: you won’t be required to pay any betting tax to the state. This is because Florida is one of the states with no income tax. However, you will still have to pay income tax on money won to the federal government, as is the case in every state.

Illinois Sports Betting Tax Rate

The Illinois sports betting tax rate is 4.95%. This is a flat rate, meaning that it applies to everyone winning money, regardless of how much money they win and how much their annual income is. Form IL-5754 must be filled out if you receive winnings worth over $1,000 and are a resident of Illinois. Those from out of the state need to fill in Form IL-1040 Schedule NR instead.

Indiana Sports Betting Tax Rate

Now we move to Indiana, which has had legal offline and online sports betting since late 2019. The Indiana sports betting tax rate is 3.23%, which is pretty reasonable when compared to the betting tax charged by some other states. All counties in Indiana also levy a local income tax.

Iowa Betting Tax Rate

Those winning money in Iowa will need to pay tax, but the amount depends on the individual’s overall earnings for the year. There are nine different tiers, and we’ve outlined them below.

  • Those earning up to $1,666 pay tax of 0.33% on all income.
  • Those earning $1,667 to $3,332 pay tax of $5.50 plus 0.67% of everything earned over $1,666.
  • Those earning $3,333 to $6,664 pay tax of $16.66 plus 2.25% of everything earned over $3,332.
  • Those earning $6,665 to $14,994 pay tax of $91.63 plus 4.14% of everything earned over $6,664.
  • Those earning $14,995 to $24,990 pay tax of $436.49 plus 5.63% of everything earned over $14,994.
  • Those earning $24,991 to $33,320 pay tax of $999.26 plus 5.96% of everything earned over $24,990.
  • Those earning $33,321 to $49,980 pay tax of $1,495.73 plus 6.25% of everything earned over $33,320.
  • Those earning $49,981 to $74,970 pay tax of $2,536.98 plus 7.44% of everything earned over $49,980.
  • Those earning over $74,971 pay tax of $4,396.24 plus 8.53% of everything earned over $74,970.

All substantial sports betting wins in Iowa are subject to a 5% withholding rate for state taxes, along with a 24% withholding rate for federal taxes.

Michigan Sports Betting Tax Rate

Next up, we come to the Great Lake State. The Michigan sports betting tax currently stands at 4.25%, about the average for betting tax around the country. Various cities in Michigan also require a city tax to be paid, with the highest city income tax being the 2.4% tax found in Detroit. Other cities, including Grand Rapids, Highland Park, Saginaw, and Flint, also charge city income tax, which can be anything from 1% to 2%. Non-residents will also have to pay tax, at a rate of half that of residents.

Montana Betting Tax Rate

Montana betting tax is paid at the same rate as Montana income tax. The more you earn over a year, the more you will pay in taxes. The seven tax brackets are listed below.

  • Income of up to $3,100 is taxed at 1%.
  • Income of $3,101 to $5,400 is taxed at 2%.
  • Income of $5,401 to $8,200 is taxed at 3%.
  • Income of $8,201 to $11,100 is taxed at 4%.
  • Income of $11,101 to $14,300 is taxed at 5%.
  • Income of $14,301 to $18,400 is taxed at 6%.
  • Income over $18,400 is taxed at 6.9%.

Payers in Montana should withhold 6.9% for state tax and 24% for federal tax when someone wins any prize worth over $5,000 and that prize is equal to or more than 300x the bet amount.

Nevada Sports Betting Tax Rate

Nevada is known as one of the world’s gambling hubs, but it doesn’t have the best-developed online sports betting model. On the other hand, it has some of the best land-based sports betting found anywhere. Regardless of whether you win money online or offline, you’ll find that the Nevada sports betting tax rate is 0%, so you’ll only need to pay the federal tax.

New Hampshire Betting Tax Rate

If you gamble in New Hampshire and manage to win some money, we’ve got good news for you, as there is no New Hampshire sports betting tax. This means you only have to pay federal income tax on your winnings.

New York Sports Betting Tax Rate

As with many of the other states we’ve profiled on this page, the amount of betting tax you’ll pay in New York depends on your overall earnings for the year. There are eight different New York income tax brackets, which we’ve listed below.

  • Income up to $8,500 is taxed at 4%.
  • Income of $8,501 to $11,700 is taxed at 4.5%.
  • Income of $11,701 to $13,900 is taxed at 5.25%.
  • Income of $13,901 to $21,400 is taxed at 5.9%.
  • Income of $21,401 to $80,650 is taxed at 6.09%.
  • Income of $80,651 to $215,400 is taxed at 6.41%.
  • Income of $215,401 to $1,077,550 is taxed at 6.85%.
  • Income of over $1,077,550 is taxed at 8.82%.

Those who win a substantial amount of money in New York will have 24% of their winnings withheld for federal tax, along with 8.82% for state tax.

NJ Sports Betting Tax Rate

New Jersey has become one of the centers of gambling in the US and currently has one of the most robust online sports betting markets in the country, but what is the tax on sports betting in the state? Well, the NJ sports betting tax rate differs depending on your income, and we’ve laid out the tax rates below.

  • Income up to $20,000 are taxed at 1.4%.
  • Income from $20,001 to $35,000 is taxed at 1.75%.
  • Income from $35,001 to $40,000 is taxed at 3.5%.
  • Income from $40,001 to $75,000 is taxed at 5.525%.
  • Income from $75,001 to $500,000 is taxed at 6.37%.
  • Income of over $500,000 is taxed at 8.97%.

When the payer is required to withhold money for federal tax, they are also required to withhold 3% state tax. The exact amount of tax you’ll need to pay depends on how much you’ve earned throughout the year – the withheld amount is just an estimate, so expect to pay more than this if you’re a high earner. Alternatively, those with lower earnings could get some of the withheld money back once their taxes have been filed.

Oregon Sports Betting Tax Rate

Oregon betting tax is determined by looking at how much you earn per year. There are four tax rates, which are described below.

  • Income of up to $3,600 is taxed at 4.75%.
  • Income of $3,600 to $9,050 is taxed at 6.75%.
  • Income of $9,050 to $125,000 is taxed at 8.75%.
  • Income of over $125,000 is taxed at 9.90%.

You will also find city income tax charged in some parts of Oregon. Anyone winning over $5,000 will have 8% withheld for state tax and 24% withheld for federal income tax.

Pennsylvania Sports Betting Tax Rate

Pennsylvania is one of the more significant sports betting markets in the United States. The Pennsylvania sports betting tax rate is 3.07%. This is a flat rate, meaning that it is paid by everyone, regardless of how much they win and how much their annual income is. There are also state income taxes to pay in Pennsylvania, called Local Earned Income Tax. Philadelphia has the highest income tax, coming in at 3.8712%, while in Pittsburgh, the tax rate is a more reasonable 1.5%.

Rhode Island Betting Tax Rate

As with some other states, the Rhode Island betting tax rate varies depending on a person’s overall income over the year. The brackets are as follows.

  • Income up to $65,250 is taxed at 3.75%.
  • Income of $65,250 to $148,350 is taxed at 4.75%.
  • Income of over $148,350 is taxed at 5.99%.

If the payer is required to withhold tax for federal purposes, it will also withhold state tax at a rate of 5.99%.

Tennessee Sports Betting Tax Rate

Tennessee is one of the newer entrants into the sports betting market, and unusually, only online gambling is permitted in the Volunteer State. It’s a fantastic place to gamble, as the Tennessee sports betting tax rate is 0%, meaning those winning money in Tennessee will only be required to pay the standard federal tax.

Virginia Sports Betting Tax Rate

The Virginia betting tax rate varies depending on how much someone earns in a year. These earnings include, among other things, money earned from an occupation and money earned via gambling. Here are the tax brackets for Virginia.

  • Those earning $3,000 or less pay a tax of 2%.
  • Those earning $3,001 to $5,000 pay tax of $60 plus 3% of anything over $3,000.
  • Those earning $5,001 to $17,000 pay tax of $120 plus 5% of anything over $5,000.
  • Those earning over $17,000 pay $720 plus 5.75% of anything over $17,000.

Virginia residents should report any winnings from gambling on Form 760. If you win money in any other state and had money withheld, use a Schedule OSC to claim the amount as a deduction against your tax liability in Virginia.

West Virginia Sports Betting Tax Rate

West Virginia has different tax rates depending on the annual amount earned by an individual. We’ve summarized them below:

  • Income up to $10,000 is taxed at 3%.
  • Income of $10,000 to $25,000 is taxed at 4%.
  • Income of $25,000 to $40,000 is taxed at 4.5%.
  • Income of $40,000 to $60,000 is taxed at 6%.
  • Income of over $60,000 is taxed at 6.5%.

State taxes are not usually withheld, but the state will withhold 6.5% when a winner does not provide identification.

Wyoming Betting Tax Rate

While you’ll have to pay federal income tax on sports betting winnings earned in Wyoming, there is no requirement to pay any tax at all to the state, as Wyoming is one of the few states with no income tax.

Play at the Top Online Sports Betting Sites

If you don’t want your tax to be automatically withheld, you should play at an offshore sports betting site. We specialize in reviewing the top offshore betting sites available to US gamblers, and we’ve listed the ten best below.

  1. BetOnline – The number one offshore sports betting site in the US
  2. BetUS – The best sportsbook for betting on basketball
  3. MyBookie – Offers a generous selection of bonuses and promotions
  4. Bovada – The sportsbook with the best overall selection of markets
  5. Xbet – A superb choice for anyone looking to bet on MLB
  6. ag – A top choice for fans of football betting
  7. BUSR – The number one site for WNBA betting
  8. Intertops – Highly generous odds regularly on offer
  9. GTBets – The best place to go for horse racing betting
  10. BetNow – Great for those looking for fast withdrawals

The Top Online Sports Betting Sites

Now that you’ve understood how tax works across various states, be sure to pick up an offshore sportsbook that you can trust. In order to help you there, we’ve done reviews on the top five.

1. BetOnline – The number one offshore sports betting site in the US

BetOnline Basketball Betting

If you’re looking to play at the best all-around offshore sportsbook in the US, you should head straight over to BetOnline. They offer everything a fan of sports betting could want, including a fantastic array of different markets, on sports including basketball, football and horse racing. What’s more, these markets usually have decent odds, so you can be sure you’re going to get nice returns on any successful bets you place. However, we still recommend that everyone checks the odds at various websites before placing a bet.

You’ll also find that BetOnline is a great place to visit if you’re looking for decent bonuses and promotions. The welcome bonus alone can add up to $1,000 to your account balance, plus you’ll also find that there are bonuses designed especially for those depositing using cryptocurrency. Speaking of cryptocurrency, you can deposit using 11 of them, including Bitcoin, Litecoin, Bitcoin Cash, Ethereum and Dogecoin.

The BetOnline mobile website is also a fantastic one, which works perfectly with smartphones and tablets of all shapes and sizes. There’s also a mobile app to download, but this is only available to those with an Android device.

Pros:

  • Deposit using many cryptocurrencies
  • Great selection of bonuses, including a $1,000 welcome bonus
  • Simple to bet using the mobile website and Android app
  • Massive variety of betting markets
  • A trustworthy site founded back in 2004

Cons:

  • No iOS app available

 

2. BetUS – The best sportsbook for betting on basketball

BetUS Basketball Betting

Another fantastic choice for those looking for a top offshore sportsbook is BetUS. Its most significant attribute is the superb selection of basketball markets on offer – something that should be of interest to many readers of this site! You will, of course, be able to bet on all NBA encounters, but it’s the chance to bet on other leagues, such as those from Argentina, England and Sweden, that really makes this site stand out from the others.

You’ll also find that BetUS is fantastic for those also looking to play casino games, as well as bet on sports. You’ll find that this site offers a giant range of exciting online slots, as well as some great table games. You’ll also find a superb live casino, which contains games run by a dealer beamed live to your screen using a webcam.

Looking for some superb bonuses? This is another area in which BetUS excels, especially if you prefer to deposit using cryptocurrency. There’s a 200% cryptocurrency bonus for new players, which can be worth up to $2,500, plus there are also huge reload bonuses explicitly aimed at those depositing using cryptocurrency. Four cryptocurrencies can be used to deposit, namely Bitcoin, Litecoin, Bitcoin Cash and Ethereum.

Pros:

  • 200% cryptocurrency bonus for new players
  • Superb online casino also available
  • Fantastic selection of basketball betting options
  • Huge reload bonuses on offer
  • Deposit using four different cryptocurrencies

Cons:

  • Non-cryptocurrency withdrawals have high minimum

 

3. MyBookie – Offers a generous selection of bonuses and promotions

MyBookie bets

Next up, we come to MyBookie, which is the place to go for anyone looking for fantastic bonuses and promotions. Not only can you double your first deposit, but you can also claim a reload bonus worth up to $500, as well as an 8% rebate on horse racing losses. There is also a massive 250% referral bonus, plus those who also enjoy playing casino games will find daily promotions waiting to be claimed. There are also some terrific contests, which have some superb prizes.

You’ll also find an incredible array of different betting options, with the live betting platform really standing out from the crowd. It looks great, plus it’s straightforward to use, allowing you to make live bets quickly before the opportunity passes. You’ll be able to bet live on basketball, football, motorsports, and much more, plus you’ll nearly always find great odds available. You can bet live using both the desktop and mobile sites.

As with many of our top offshore sportsbooks, you’ll find that cryptocurrencies can be used to deposit and withdraw at MyBookie. The cryptocurrencies available are Bitcoin, Litecoin, Bitcoin Cash, Ethereum and Ripple.

Pros:

  • Superb selection of bonuses and promotions
  • Get an 8% rebate on all horse racing betting losses
  • Deposit using a range of cryptocurrencies
  • Fantastic live betting platform for desktop and mobile users
  • Great selection of horse racing markets

Cons:

  • Fees for bank wire and e-check withdrawals
  • No loyalty scheme available

 

4. Bovada – The sportsbook with the best overall selection of markets

Bovada Basketball Betting

Next on our list of the best offshore sportsbooks available to US gamblers is Bovada. This is an exceptionally well-known site, having had some issues in the past, but we can assure you that these have been resolved, and Bovada is now a superb place to play. This is the case for both desktop and mobile players, the latter of whom can enjoy betting using either their mobile browser or the fantastic Bovada mobile app, available for both iOS and Android.

The number one reason to visit Bovada is the superb selection of sports betting markets on show. They’ve got pretty much everything covered, from popular competitions, such as the NBA and NFL, to more niche competitions from various countries. There’s an entire section of the site dedicated to horse racing, plus the live betting platform is one of the best around, offering loads of betting options, decent odds and an intuitive interface.

Bovada also has some fantastic promotions, including a Bitcoin sports betting welcome bonus worth up to $750. You’ll also find that it has a nice loyalty scheme to reward regular players. Enjoy playing poker and casino games too? If so, you’ll also find some great bonuses at these sections of the Bovada website.

Pros:

  • Superb selection of betting options
  • Fantastic mobile app for iOS and Android users
  • Great live betting platform
  • $750 welcome bonus for Bitcoin users
  • Poker and casino games also available

Cons:

  • Somewhat shady past, but reputable now
  • High fees attached to credit card deposits

 

5. Xbet – A superb choice for anyone looking to bet on MLB

Xbet NBA Betting

In fifth place is Xbet, a site that offers various betting options, but is particularly noticeable for its array of MLB markets. You’ll be able to bet on a wide variety of markets on every game, plus there are many futures available. Live betting on MLB is also a very strong aspect of this site. However, don’t worry if you also enjoy betting on other sports, as you’ll find strong coverage of basketball, football and more at Xbet.

But why else should you consider betting at Xbet? Well, the bonuses are particularly impressive, with new players given a sign-up bonus worth up to $500 and horse racing betting fans getting a 7% rebate on their losses. Xbet is also a great place to play if you enjoy casino games, as it has a fantastic selection of online slots, as well as table games and live dealer games.

You’ll be able to deposit at Xbet using a range of cryptocurrencies, but there aren’t many other depositing options. What’s more, those depositing using anything else other than cryptocurrency will find that the minimum deposit is high.

Pros:

  • Superb place to bet on MLB
  • Plenty of bonuses, including a $500 sign-up bonus
  • Deposit using several cryptocurrencies
  • 7% rebate on horse racing betting losses
  • Great live betting platform

Cons:

  • Lack of non-cryptocurrency banking options
  • No loyalty scheme offered

 

Conclusion: Paying Tax on Sports Betting

If you’ve read this entire page, the question of “do you pay tax on sports betting” should be one you can answer. However, here’s a little recap: if you’re in the US and you win any amount of money from sports betting, you are expected to pay tax, on a federal level and also often on a state level. Earn enough, and the payer could even take away 24% of your winnings and send them straight to the IRS, along with state tax as well, to make sure your taxes are at least partly paid.

If you would rather not risk your winnings being withheld, you should play at an offshore sportsbook. You’ll find that we’ve listed the best offshore sportsbooks on this page, with our number one offshore sportsbook being BetOnline. Why not make your way over to BetOnline today and see if it’s the perfect sportsbook for you?

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Jamie is a professional copywriter specializing in online gambling, including sports betting and casino. He's also a huge sports fan, happy watching anything from March Madness to obscure lower league English soccer. Other interests include movies, food, and travel.