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💌 Today's Thing: Your Bet, Your Tax Bill — and Why the App Won't Save You
Some call this weekend the most excitement-laden, suspense-filled weekend on the annual sports calendar. As March Madness moves into full swing for men and women in college basketball, there are more eyes on every single moment of game action than ever. There two major reasons: sports data analytics…and wide-open gambling.
If you've ever tapped “Place Bet” on DraftKings, FanDuel, BetMGM, Caesars Sportsbook, PointsBet, or ESPN Bet through apps on your phone or computer— or clicked through a parlay on a state-licensed platform — this newsletter is for you. Whether you're a weekend warrior who drops $20 on an NFL game or a more committed bettor who tracks spreads across college basketball and the NBA, the IRS considers every dollar you win to be taxable income.
And starting January 1, 2026, the rules have changed in ways that could surprise even casual bettors. Read on.
On the floor before the start of a second-round NCAA Women’s Basketball tournament game at the University of Maryland in March 2023. College Park, MD / D. Price
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📜 A Little Background: How We Got Here
As the Tax Clarity Newsletter reported last October 30th, much of today's sports betting industry traces its legal origins to the U.S. Supreme Court's landmark 2018 decision in Murphy v. NCAA1, which struck down the Professional and Amateur Sports Protection Act of 1992 — a federal law that had effectively banned sports wagering in nearly every state. That decision opened the floodgates. Within a few years, platforms like DraftKings and FanDuel — which began as daily fantasy sports companies — transformed into full-fledged sportsbooks operating in dozens of states.
Sports betting phone apps, like this one by BetMGM, allow gamblers located within specific states to place wagers on events like individual games of the NCAA basketball tournament, and combinations of multiple games called “parlays”. Columbia, MD / D. Price, March 20, 2026.
Today, you don't need to fly to Las Vegas to place a bet. You can do it from your couch, at halftime, on your phone. BetMGM operates under the MGM Resorts umbrella, Caesars Sportsbook is backed by one of the oldest casino brands in America, and ESPN Bet brought the Disney sports media empire directly into the wagering business. The industry's rapid expansion brought with it scrutiny from regulators, law enforcement — and the IRS.
As I reported last October on Sweet Clarity Media, IRS Criminal Investigation (IRS-CI) issued a public alert at the start of the NFL season encouraging taxpayers to "protect themselves" when placing wagers. That protection starts with understanding the tax rules.
🧾 The Deets — Clean and Quick: How Gambling Taxes Work in 2026
Here is what every casual bettor should know:
All winnings are taxable income. Every dollar you win on FanDuel, DraftKings, BetMGM, or any other licensed platform must be reported on your Form 1040. This is true whether or not the platform sends you any paperwork. The IRS does not offer a "small potatoes" exemption for casual bettors.1
Form W-2G reporting thresholds are rising. Starting with tax year 2026, the threshold for a sportsbook or casino to issue a Form W-2G — the form that reports significant gambling winnings to you and to the IRS — has been raised to $2,000, up from prior lower thresholds. This is indexed for inflation going forward. But here's the catch: even if you never receive a W-2G, you are still legally obligated to report every dollar of winnings.2
Other Key Reporting Thresholds:
Automatic Reporting ($600+): Sportsbooks issue a Form W-2G if you win $600 or more, and the payout is at least 300 times the wager.
The 300-to-1 Rule: Winnings must be over $600 AND 300 times the bet to trigger mandatory reporting. For example, a $2,000 win on a $10 bet requires reporting, but a $600 win on a $5 bet may not trigger a W-2G.
Withholding ($5,000+): Casinos or sportsbooks may withhold 24% for federal taxes if net winnings (winnings minus wager) exceed $5,000.
Losses can only offset winnings — not other income. An amateur gambler cannot use a rough year of sports betting losses to reduce wages, investment income, or any other type of taxable income. According to reporting by Nathan Goldman in Forbes, losses from gambling transactions are deductible only to the extent of gambling winnings — and only if you itemize deductions on your return. If you take the standard deduction, your losses provide zero tax benefit.3
Starting in 2026: A new 10% floor on gambling losses. This is where it gets painful. Under the One Big Beautiful Bill Act, signed into law on July 4, 2025, the deduction for gambling losses is now capped at 90% of losses4 — even when those losses don’t exceed your winnings. In practice, 10% of every losing wager is now permanently non-deductible. This creates what tax professionals sometimes call phantom income.
📊 EXAMPLE: The 90% Rule in Action
You win $10,000 across the year on DraftKings and FanDuel. You lose $10,000 on BetMGM and Caesars. You broke even — right?
Under the new law, you can only deduct $9,000 of those losses (90%). Result: You owe taxes on $1,000 of income you never actually kept.
If your losses exceeded your winnings — say $12,000 in losses vs. $10,000 in winnings — your deduction is still capped at 90% of $10,000, or $9,000. You are taxed on $1,000 of "income" despite losing money overall. |
However, Nathan Goldman’s Forbes article also provides a glimmer of hope that this haircut on losses may be repealed. That hope is in the form of bipartisan legislation introduced on January 12 called the Facilitating Useful Loss Limitations to Help Our Unique Service Economy (FULL HOUSE) Act (HR 6985).5
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📱 Can You Just Use the App? Why Platform Records Aren't Enough
This is the question we hear most — and the answer matters. DraftKings, FanDuel, BetMGM, Caesars, and the other major sportsbooks all maintain transaction histories in their apps and web portals. You can generally download a summary of your activity for a calendar year. So can't you just hand that to your accountant and call it a day?
Not quite. Here's why:
Platforms track winnings, but may not break out losses in a tax-useful format. A sportsbook's account statement might show net results, deposits, withdrawals, and bonuses — but it may not give you the session-by-session or day-by-day breakdown the IRS actually requires. The IRS wants your gambling activity documented by each "session" — meaning each day of gambling is treated as its own unit of gain or loss.6,7,8
Promotional credits and bonuses create ambiguity. All of the major platforms offer welcome bonuses, odds boosts, and free bet credits — DraftKings and FanDuel are particularly aggressive with promotions. How those promotional credits are classified for tax purposes is a gray area that your account statement probably doesn't resolve for you.
Multi-platform betting is the norm — and a recordkeeping trap. If you bet on DraftKings for football, switch to FanDuel for basketball, use Caesars for its loyalty points, and place a parlay on ESPN Bet, your activity is spread across four separate platforms. Each will have its own statement, and none of them will aggregate your losses against your winnings for tax purposes. That math falls on you.
Platform records can change — yours shouldn’t. Accounts get closed. Platforms exit markets. Promotions are reversed. Your own contemporaneous log — maintained as you go, not reconstructed in April — is the gold standard the IRS expects to see if you’re ever audited.7
✅ What Good Records Look Like (Per IRS Guidance)7,8,9 |
• Date and type of wager • Name and address of platform or establishment • Amount won or lost per session/day • Any W-2G forms received • Supporting documentation: screenshots, betting slips, bank/payment records
A simple spreadsheet updated after each betting session goes a long way. |
📅 Key Takeaways for the 2026 Tax Year
1. Report everything. Every win on every platform — DraftKings, FanDuel, BetMGM, Caesars, PointsBet, ESPN Bet, or a state lottery — is taxable income. The W-2G threshold going up does not reduce your reporting obligation.
2. The 10% haircut is real. Even if you perfectly break even gambling, you may still owe taxes. Budget for it.
3. Standard deduction filers get no relief. If you don't itemize, you pay tax on gross winnings with no offset for losses. Full stop.
4. Don't rely solely on your app. Platform statements are a starting point, not a finish line. Keep your own records in real time.
5. State taxes vary. Most states with legalized sports betting — including Maryland, New Jersey, New York, Pennsylvania, and Michigan — have their own rules on gambling income. Check your state's guidance or consult a local tax professional.
6. Watch for legislative updates. The 90% cap on gambling loss deductions is a live political issue. Whether Congress follows through on the bipartisan bill to repeal it remains to be seen.
There’s the scoop, everyone! Thanks for taking time to check out this week’s edition of the Tax Clarity Newsletter.
Thank you so much!
References (9):
1 MURPHY, GOVERNOR OF NEW JERSEY, et al. v. NATIONAL COLLEGIATE ATHLETIC ASSOCIATION et al., 584 US 453 (2018). Last accessed March 20, 2026.
2 Internal Revenue Service. “About Form W-2 G, Certain Gambling Winnings” IRS.gov, January 29, 2026. Accessed March 19, 2026.
3 Goldman, Nathan. “Gambling Tax Alert: New Law Cuts Loss Deductions, Bettors Face Big Hit,” Forbes, January 13, 2026. Accessed March 20, 2026.
4 Pub. L. 119-21, 139 Stat. 166 (2025), One Big Beautiful Bill Act, §70114, Extension and modification of limitation on wagering losses.
5 Text - H.R.6985 - 119th Congress (2025-2026): Facilitating Useful Loss Limitations to Help Our Unique Service Economy (FULL HOUSE) Act, H.R.6985, 119th Cong. (2026). Accessed March 21, 2026.
6 Internal Revenue Service. “Topic No. 419, Gambling Income and Losses.” Accessed March 20, 2026.
7 Internal Revenue Service. IRS Publication 525, Taxable and Nontaxable Income, Gambling Winnings and Losses section, Last updated January 23, 2026. Accessed March 20, 2026.
8 Internal Revenue Service. Chief Counsel Advice AM 2008-011, Session Method for Slot Machine Play, December 12, 2008. See also IRS Notice 2015-21, Safe Harbor Method for Determining a Wagering Gain or Loss from Slot Machine Play. Accessed March 20, 2026.
9 Internal Revenue Service. IRS Publication 529, Miscellaneous Deductions, Recordkeeping for Gambling Activities. December 20, 2020. Accessed March 19, 2026.