Tax Breaks for Charitable Giving: Maximize Your Impact and Your Savings
Category: Business
In the over four years since a 2018 Supreme Court ruling cleared the way for the legalization of sports gambling, over thirty states and Washington, D.C. have done just that — with much more likely to follow in the short term.
With legal sports gambling at an all-time high, it’s more important than ever that individuals understand the tax implications of these activities to stay compliant with the law.
It’s a safe bet you’d rather avoid the costly penalties that can come from a mistake at tax time. So, to keep the odds in your favor, we’ll examine how gambling winnings are taxed, what deductions are available to gamblers, how online gambling is taxed, and more.
After all, sports betting may involve chance, but taxes are a sure thing…and you don’t want to gamble with the IRS!
Whether you’re an experienced sports gambler or a casual bettor, read on to discover these critical tax implications of sports betting and gambling.
First, it’s essential to understand that the tax implications of sports betting depend on whether you engage in it as a business or a hobby.
If you are a professional sports bettor, your winnings are considered taxable income, and you must pay taxes on them accordingly. You can also deduct your gambling losses, but only up to the amount of your winnings.
On the other hand, if you engage in sports betting as a hobby, your winnings are still taxable income, but you can only deduct your gambling losses if you itemize your deductions on your tax return. Additionally, your deductions for gambling losses cannot exceed your winnings.
Regardless, your gambling income is fully taxable and must be reported on your tax return — meaning you are responsible for keeping accurate records of your activity, including winnings and losses, the amount you won or lost, the date and type of wager, and the name and address of the establishment where you placed the bet. This information will calculate your tax liability and support any deductions you may be eligible for. You also should be prepared to provide documentation, such as receipts, tickets, and other records.
Additionally, sports betting winnings may also be subject to state and local taxes, depending on where you live. It is important to check your state and local tax laws to determine your tax liability.
The classification of fantasy sports as gambling has been the subject of debate, with some arguing that, as they require knowledge to play effectively, they are games of skill and not of chance. However, the IRS has affirmed multiple times in rulings that daily fantasy sports are considered gambling for tax purposes and subject to federal tax law.
That means fantasy sports winnings are taxable, and players must report them to the IRS. Additionally, fantasy sports platforms must report any winnings of $600 or more.
Daily fantasy sports, like sports betting, can be considered a business or hobby depending on whether it involves skill. However, if the individual can demonstrate profits for at least three of the last five years or if playing is the primary source of income, then it can be classified as a business or trade. This classification makes it easier to deduct expenses related to the activity from the income if necessary.
The tax rules for online betting vary depending on the state in which you reside, but generally, online betting is also considered a form of gambling subject to federal tax law. That means that any winnings should be reported on your tax return.
When paying taxes on gambling winnings, the amount you owe will depend on the money you win and the type of gambling you engage in. If you win $10,000 or more from a single bet, the payer must withhold 24% of your winnings for federal taxes. However, if your winnings are less than $5,000, you can offset your losses against your winnings.
If you itemize your deductions on your tax return, you can deduct gambling losses up to the amount of your winnings. However, you must have accurate records to support your deductions. It is also important to note that some states do not allow gambling losses to be deducted, so it is essential to check with your state’s tax authority to determine your tax liability.
In addition to federal taxes, many states also tax gambling winnings. The tax rate and rules vary by state, so it is crucial to determine your tax liability with your state’s tax authority. Some states may require you to pay taxes on your winnings even if you are not a state resident.
Once again, keep accurate records of your gambling activity, report your winnings on your tax return, and check with your state’s tax authority to determine your tax liability. Doing so can avoid penalties and interest and ensure that you stay on the right side of the law.
The good news: Yes, gambling losses can be claimed as an itemized deduction on your taxes, but only up to the extent of your gambling winnings and only if you itemize. In other words, you can’t claim more in losses than you have in winnings, and you cannot claim the standard deduction.
Furthermore, you cannot offset your winnings from one day with your losses from another day, and the IRS typically requires winnings and losses to be reported separately. However, you can net your wins and losses if you win and lose on the same day for the same type of wager.
Suppose you can win money from lotteries, sweepstakes, wagering pools, horse track betting, bingo, slot machines, keno, or poker tournaments. In that case, there are federal withholding and reporting requirements to remember.
For table games such as blackjack, craps, baccarat, and roulette, W-2G forms are not required, regardless of the amount won. However, it is still important to report all winnings on your tax return, no matter how small.
It is also worth noting that even if you don’t win an amount that meets any of the thresholds mentioned above, you are still legally responsible for reporting your winnings at tax time. Failing to report any gambling winnings can result in penalties and interest charges, so keeping accurate records of all your gambling activity throughout the year is important.
As the legalization of sports betting and gambling sweeps through an increasing number of states, a strong understanding of the tax implications is essential for anyone participating in these activities to avoid costly penalties or fees.
Experienced tax professionals (like us!) can help you fully understand and navigate the implications of sports betting and gambling to prepare better to minimize liabilities and plan effectively.
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Category: Business
Category: Business
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Jeff Coyle, CPA, Partner of Rosenberg Chesnov, has been with the firm since 2015. He joined the firm after 20 years of business and accounting experience where he learned the value of accurate reporting, using financial information as a basis for good business decisions and the importance of accounting for management.
He is a diligent financial professional, able to manage the details and turn them into relevant business leading information. He has a strong financial background in construction, technology, consulting services and risk management. He also knows what it takes to create organizations having built teams, grown companies and designed processes for financial analysis and reporting.
His business experience includes:
Creating and preparing financial reporting, budgeting and forecasting.
Planning and preparation of GAAP and other basis financial statements.
Providing insight on financial results and providing advice based on those results.
Jeff also has a long history of helping individuals manage their taxes and plan their finances including:
Income tax planning and strategy.
Filing quarterly and annual taxes.
Audit support.
General financial and planning advice.
Prior to joining the firm in 2015, Jeff was in the private sector where he held senior financial and management positions including Controller and Chief Financial Officer. He has experience across industries, including construction, technology and professional services which gives him a deep understanding of business.
Jeff graduated from Montclair State University, he is a CPA and member of the American Institute of Certified Public Accountants, New York State Society of Certified Public Accountants and New Jersey State Society of Public Accountants.
Jody H. Chesnov, CPA, Managing Partner of Rosenberg Chesnov, has been with the firm since 2004. After a career of public accounting and general management, Jody knows the value of good financials. Clarity, decision making, and strategy all start with the facts – Jody has been revealing the facts and turning them into good business results for more than three decades.
He takes a pragmatic approach to accounting, finance and business. His work has supported many companies on their path to growth, including helping them find investors, manage scaling and overcome hurdles. His experience and passion for business reach beyond accounting and he helps businesses focus on what the numbers mean organizationally, operationally and financially.
He has a particular expertise in early-stage growth companies. His strengths lie in cutting through the noise to come up with useful, out of the box, solutions that support clients in building their businesses and realizing their larger visions.
Prior to joining the firm in 2004, Jody was in the private sector where he held senior financial and management positions including General Manager, Chief Financial Officer and Controller. He has experience across industries, which gives him a deep understanding of business.
Jody graduated with a BBA in Accounting from Baruch College, he is a CPA and member of the American Institute of Certified Public Accountants and New York State Society of Certified Public Accountants.
In addition to delivering above and beyond accounting results, Jody is a member of the NYSCPA’s Emerging Tech Entrepreneurial Committee (ETEC), Private Equity and Venture Capital Committee and Family Office Committee.
He is an angel investor through the Westchester Angels, and has served as an advisor for many startup companies and as a mentor through the Founders Institute.