Who knew that when the Atlanta Falcons led the New England Patriots 28-3 midway through the third quarter in Super Bowl LI that the Patriots would prevail? Ask any Patriots fan and they believed. Indeed, they probably put their faith in their team with their wallets before the game by placing bets.
Yes, gambling is part of the fabric of America’s culture. And with Super Bowl LII coming on Sunday, betting will once again be center stage. With more than 100 million was bet on last year’s big game in Las Vegas casinos, it is estimated that more money will wagered this year. Nevertheless, it is likely that Uncle Sam will come calling if you win big this year. In fact, there are requirements for reporting and withholding from winning bets.
Essentially, if you win more than 300 times your original bet, the paying casino, race track or gambling establishment is required to obtain your Social Security number so that it may inform the IRS that you have come into some extra money. And if you want to leave the establishment with your money, it is also likely that the payer will reduce your jackpot by the 25 percent federal tax rate.
So if you placed a $1 prop bet (which player would score the first touchdown, for example) and it paid out at $500.00, the casino is required to take 25 percent off your winnings for tax purposes. While you may leave 25 percent lighter, it may be possible recoup the taxed amount through other exemptions and credits that you apply through your tax return. Nevertheless, getting $400.00 on a $1 bet is still pretty cool.
If you have further questions or problems with gambling winnings on your return, an experienced tax law attorney can help.