To sports bettors in New York: Beware of the taxes.
Under US law, you must pay federal income tax on sports betting winnings over $600, as long as the return was 300x your wager or more. If you accrue winnings of $600 spread over 12 months, you’ll have to cough up a 24% cut to the IRS.
In addition, you may also have to pay state income tax on your gambling winnings. New York State has some of the highest tax rates in the US – around 4–8.82% – on wins. You’ll have to pay 4% on profits up to $8,500 and 8.82% for anything above $1m.
Will Sportsbook in New York Report Your Winnings to the IRS?
The NY sportsbook has a legal duty to report big wins to the IRS. They will issue a Form 1099-MISC to you and the IRS simultaneously. You may also receive a Form 1099-K which covers third-party processors like PayPal. Regardless of whether the sportsbook sends you a form, you will still need to report your gambling winnings on your tax return.
If your win is big, the NY sportsbook may issue a Form W-2G to send to the IRS. Federal taxes are usually deducted automatically from the win. Typically, a W-2G is issued by the end of January the year after your win.
There is a section on the Form W-2G called Certain Gambling Winnings where you can detail all your wins or losses for the year. It’s also possible to detail gambling losses. For example, you may have won $5,000 on sports throughout a tax year but lost $2,000. You will only have to pay tax on the difference. Note that while you can deduct losses from winnings, you can’t deduct losses if they are more than your total gambling wins.