With the rise of legalized sports betting and prediction markets like Draft Kings and Kalshi, gambling has entered the mainstream. No longer confined to smoky casinos and golf clubhouses, its new form also means there are a lot of new winners who might not be informed about the tax liability associated with their earnings. If that’s you and you recently struck it rich, you might be asking yourself a few questions. Is it treated like income? How should I report it? Should I add this to my LinkedIn? In this article, we’ll break down everything you need to know about your sports bet earnings.

Firstly, like almost everything in life, sports betting or gambling wins are taxed. They are considered taxable income and will be taxed at whatever your income tax rate is determined to be – from 10% to 37%. If you win more than $600, you should receive an IRS Form W-2G from the business or platform you used. If you win $5,000 or more, the business may withhold up to 24% for federal income tax. If this happens, it will show up on the W2-G you receive. Come tax-time, you’ll report your earnings as “gambling income” on your Form 1040, Schedule 1.

What about those pesky losses? You can deduct gambling losses only if you itemize your return. In prior years, you could deduct 100% of your gambling losses up to your winnings but that’s changed recently. A new provision in the One Big Beautiful Bill Act changes this threshold to up to 90% of your losses, affecting any 2026 gambling earnings to be reported on your 2026 return. So if you lose $10,000, you would only be able to deduct $9,000 from your winnings (assuming they are higher than $10,000.) An important thing to note is that you’ll need to keep your own thorough records. A sports betting company or casino might only send you what you won, they aren’t required to send information about what you’ve lost. You’ll have to keep records for each individual transaction, you aren’t allowed to lump all of your bets together.

If you’re a one-time scratch-off winner, you might not need to worry about a complicated tax situation arising. However, if you are an avid sports bettor or prediction market enthusiast, your earnings can add up quickly and have a substantial impact on your taxable income. Make sure to keep records of your losses and wins and consider when it might be beneficial to itemize in order to offset some of your winnings with your losses. If you have any questions on the tax liability around gambling earnings, feel free to reach out to a ClarkSilva team member today!