Earlier this month, I set fire to $85.
I didn’t use a lighter or match. Instead, I joined and then instantly bombed out of an NFL survivor pool. These contests require each participant to select one NFL team to win each week, without selecting the same team twice. If your team wins, you live another week. You lose, and I’m done with this year.
After two weeks of NFL excitement, more serious punters are feeling the burn: Of the 6,133 participants who paid the $1,000 entry fee to compete in Circa Sportsbook’s Las Vegas-based Survivor Pool, only 2,033 are left.
Can you blame us though? The prize pool for winning the Circa Pool is $6 million. The most modest swimming pool pot is worth more than 40 thousand dollars. Imagine what you could do with that kind of money.
As a financial writer, I’m here to tell you: First, you’ll pay taxes on it.
“Every CPA will tell you that you should report income from any source,” says Ray Condler, a certified public accountant with Condler & Company in Las Vegas. “If you win $100 in your office pool, in theory, you should report it.”
This applies to winnings from casinos and legal sportsbooks as well as payouts from informal gatherings like those I’m no longer in.
If you drop a modest score of, say, a few hundred dollars, it’s up to you to report your winnings to the IRS – neither a casino nor a pop of accounts payable will do that for you.
If you are a big casino winner (generally if your winnings are at least $600 and at least 300 times your bet amount), you will receive the IRS Form W-2G. The winner in my group won’t get any such documentation, but it would be wise to follow the law, says Kondler.
“They can take the $40,000 and put it in their bank account,” he says. But, “If they are scrutinized, they will have a hard time explaining what that is.”
For us losers, there’s one upside: The IRS allows gamblers to deduct their losses—with a few important caveats.
First, if you are an amateur gambler, you will have to detail to take the discount. These days, since the standard deduction for single files is $12,950, most people don’t detail, which means you’ll most likely have to put up with the loss on the chin.
Professional punters do a little better. If you are a professional, you can deduct your losses as business expenses table c without the need for detail.
Whether you are a professional or not, you can only deduct losses to the extent that you offset your winnings. If you have $500 winnings (which will be taxed as income) and $1,000 losses, you can only deduct $500 in losing bets.
If you plan to do some gambling calculations on your tax return, it’s smart to keep a record of your winnings and losses separately throughout the year, says Kundler. “In an ideal scenario, you would be able to show all of your income and deduct all of your losses,” he says. “If you play different events, try to keep track of the things you enter and lose.”
If you’re lucky enough to land a big win like the Survivor Total Prize, having some losses to report can help lower an otherwise big tax bill. But make sure that they are, in fact, your losses.
The last time I was at a sports book in Vegas, a gentleman was walking around the room asking for tickets to be lost before frustrated bettors rip or throw them away—he even offered to exchange free drink vouchers for loser ones.
It turns out he made $100,000 early in the year and planned to use this set of losing bets to offset his winnings. You don’t have to be an accountant to know that this strategy can get very hot water with the IRS.
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