Did you, like the Baltimore Ravens, come up a winner yesterday thanks to some bets you made on the National Football League’s big game?
Super Bowl XLVII medallion photo by Au Kirk via Twitter
Uncle Sam thanks you.
Gambling winnings, whether thousands of dollars on a sports championship or a few bucks from a lottery scratch-off ticket, are taxable income.
Some of the taxable winnings come via the hundreds of prop, short for proposition, bets that are connected with major sporting events.
Among the goofiest prop bets on the Baltimore Ravens and San Francisco Forty-niners game were whether the coin toss would be heads or tails (and who would win it and whether the team would defer receiving the ball if they called the flip correctly); how many times Ray Lewis would mention God in post-game remarks; and the highest number of tweets per second.
The over/under on the Twitter count bet was 17,000, meaning that in one second at some time during the game more or fewer than that number of tweets would be sent. I suspect the stadium blackout tweets pushed it well over the line.
There even was an opportunity to bet on whether any player would get arrested before the Super Bowl. I’m happy to report that no one ended up in the New Orleans Graybar Hotel before the kick-off. I haven’t checked to see if anyone ended up there after post-game celebrations.
The biggest in Super Bowl XLVII prop bet, according to Ray Brewer of the Las Vegas Sun, was the safety by Ravens’ punter Sam Koch in the last seconds of the game. “The safety had a huge impact for bettors at Las Vegas books. Most houses listed a safety at +600, meaning gamblers would win $60 for every $10 wagered,” wrote Brewer in today’s From the Pressbox column.
If you collected by betting there would be a safety, or won any money gambling on the NFL’s championship game and/or events even remotely related to it, you’ll need to tell the Internal Revenue Service about those winnings when you file your 2013 taxes.
And yes, even illegal bets that pay off are supposed to be reported.
Today’s Daily Tax Tip guides you through the process of reporting and paying taxes on your gambling winnings.
Here are some highlights.
If you win at a casino, race track or other legitimate gambling venue, depending on the game of chance and amount you win, you could receive a Form W-2G from the betting parlor detailing your winnings. The IRS will get a copy of this form, too, so be sure to report it.
The total of all your gambling winnings, with and without W-2Gs, goes on line 21 of Form 1040. The amount of prizes or awards, either the cash you received or the value of merchandise won, also goes here.
You’ll want to use the long 1040 because you can itemize all your gambling losses on Schedule A to help offset your taxable winnings.
To make sure you get the most from those bad bets, keep good records. The IRS has suggestions on the betting info to note in Publication 4706.
You don’t have to include your gambling log book with your return, but it definitely will help you answer any IRS questions as to how you were able to reduce your $3,000 in winning Super Bowl bets to zero.
Now I’m not saying you need to head to Vegas, Reno, Atlantic City, the local horse race track or the nearest lottery ticket seller every day to wipe out any gambling wins. If you’re doing that, you also should put the nearest Gamblers Anonymous chapter’s phone number on your speed dial.
But don’t just toss those losing tickets. If you do collect a big bet pay-off, your many more losses can help reduce the amount of winnings on which you’ll owe tax.
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