Super Bowl LIII is in the books, and quite literally, so were a lot of game-related bets. Regardless of how you felt about the Patriots and Rams (they’ll owe taxes in several states ), the halftime show, or the commercials, chances are you made a little Super Bowl wager.
It was estimated that nearly 23 million Americans would risk $6 billion on Super Bowl gambling. And the majority of those bets - around 98 percent or so – were illegal. In May of 2018, the Supreme Court struck down a law that had been passed by Congress in 1992 that banned most types of sports gambling. Soon after the Court’s ruling, Delaware, Mississippi, New Jersey, New Mexico, Pennsylvania, Rhode Island, and West Virginia joined Nevada in offering sports books.
To place a legal sports bet in these states, it is necessary to be physically present in the establishment offering the sports book. Online sports gambling is allowed in Nevada, New Jersey, and West Virginia, but you still must be inside the state borders to participate. Because the penalties for allowing out-of-state patrons to place bets are so severe, casinos and other gambling establishments have elaborate safeguards in place to ensure customers are following the law.
The inability to travel to one of the states offering legal gambling does not stop most people from placing a bet or two in the days leading up to the Super Bowl. However, even innocent office pools are considered to be unlawful. So are proposition bets, Super Bowl themed wagers that go beyond the final score. Proposition bets are seen as a way to get nonfans involved in watching the game, and may include such things as betting on which beer company would have the first commercial, how long Gladys Knight would take to sing the National Anthem , and even what color Gatorade would get poured on the winning coach.
Even if the gambling activity itself was unlawful, all winnings are required to be included as income on your 2019 tax return. The tax code says all income must be reported; casinos and other legal establishments routinely issue W-2G or 1099-Misc forms to those whose winnings exceed a set amount. However, whether you receive a tax document or not, you are required to report any money received from gambling. If you itemize, you can deduct your properly documented losses up to the amount of your winnings, so it’s always a good idea to keep accurate records of any gambling activity.
You may recall from your history class that it was tax evasion that finally sent Al Capone to prison (and reportedly led to an unprecedented number of delinquent tax returns being filed once news of his conviction got out). While the IRS won’t toss you in jail for failing to report that you won a modest wager, anyone caught not reporting such income would face the usual interest and fines that come with under reporting income.
Need more information on how the tax law treats gambling activities? Give us a call! And whether you were pulling for the Patriots or the Rams, we hope your Super Bowl party was a winner!
