Betting on the March Madness men’s and women’s NCAA tournaments can result in both winnings and losses, but it’s important to remember that these earnings may be subject to taxes. Tens of millions of Americans participate in these bets, with billions of dollars being wagered each year. All gambling winnings, including those from March Madness bets, must be reported to the IRS and may be subject to federal and state taxes, unless exempted by specific states.
If you receive at least $600 in net winnings from your March Madness bets, you may receive a tax form W-2G from the entity that paid you, especially if you placed your wager at a legal sportsbook. However, regardless of whether you receive this form, it’s essential to report all gambling winnings on your tax return. In some cases, entities may be required to withhold 28% for federal taxes if your winnings exceed $5,000, which could affect your tax obligations when filing.
Losses from gambling, such as those incurred during March Madness bets, can potentially lower your tax bill if you itemize your deductions. Gambling losses can be used to offset gambling winnings for the same tax year, but only if you itemize your deductions and exceed the standard deduction. It’s important to keep accurate records of your losses, as you can never deduct more than your gambling winnings. Surplus losses from one year cannot be carried forward to future tax years, so any excess losses cannot be used to offset winnings in the following years.
Only about 10% of taxpayers typically itemize deductions, making it essential to assess whether it makes financial sense to do so in your situation. If you won money through gambling but also incurred losses, you can offset your winnings with your losses up to the amount of your net winnings. For example, if you won $1,000 but lost $1,500, you can fully offset your winnings if you itemize your deductions, but you will not be able to deduct the remaining $500 in losses. It’s crucial to understand these rules and implications when reporting March Madness winnings and losses on your tax return.
Overall, whether you won or lost on your March Madness bets, it’s important to be aware of the potential tax implications. While winners may need to report their earnings and possibly pay taxes, those who lost may be able to offset their gambling winnings with their losses, potentially lowering their tax bill. Understanding the rules around gambling winnings and losses, as well as the requirements for reporting them to the IRS, can help ensure compliance and accurate filing of your taxes.
