New Jersey clears way for sports betting. Remember the IRS gets its share

Personal finance

Other states moving toward offering it include Pennsylvania, West Virginia and Mississippi. The old law, the Professional and Amateur Sports Protection Act, largely outlawed sports betting outside of Nevada.

As for taxation of your winnings: The new tax law that took effect this year continues to allow winners to deduct their gambling losses up to the amount of gambling income, as long as they itemize their deductions instead of taking the standard deduction. The information gets reported on your Form 1040 as “other income.”

Be aware that because the standard deduction nearly doubled for all taxpayers and most deductions were eliminated, fewer taxpayers are expected to have enough deductions to make itemizing worth it.

Professional gamblers, meanwhile, face other rules for 2018 through 2025: When they deduct their expenses (i.e., traveling to and from a casino), they must add them to their gambling losses when calculating the value of the deduction instead of writing them off separately as a business expense.

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Generally speaking, if your winnings are above $5,000, the payer, such as a casino, is required to withhold federal taxes. Effective this year, that withholding rate is 24 percent, down from the previous 25 percent.

However, don’t assume the amount withheld is what you’ll actually owe on the money.

“The casino doesn’t know if you make $12,000 a year or $26 million a year,” Smith said. “They withhold at that rate, but they don’t know what tax bracket you’ll be in.”

Taxes also might be withheld on winnings of less than $5,000 in certain situations, such as if the amount won is 300 times the original bet (i.e., a $600 win on a $2 bet).

Additionally, depending on how much you win, you’ll receive a Form W-2G from the casino. Even if you do not, the IRS still expects you to pony up at tax time.

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