With football betting in full swing, don’t forget the IRS will want to know about your winnings

It appears Americans are definitely ready to bet on football.

Heading into the National Football League’s 102nd season — which kicked off last week — about 45.2 million Americans said they plan to wager on games, up about 36% from a year ago, according to research from the American Gaming Association. The growth comes as half of states now offer legalized sports betting and more are gearing up to do so.

That means your winning bets could be subject to taxation even before it reaches you, depending on how big it is. And if you win money through unregulated channels, you’re expected to fess up to the IRS at tax time.

“Whether you enjoy bets on races, join a fantasy football league, join friends at bingo — or have other gambling hobbies — the winnings are fully taxable and you must report the income on your [tax] return,” said Susan Allen, senior manager for tax policy & advocacy with the American Institute of CPAs.

Since the Supreme Court overturned a federal law in 2018 that had banned sports betting in most places, the number of states that have legalized the activity has reached 32, with 26 of them plus Washington, D.C., with betting available, the gaming association said. Another five states’ systems may be operational by the end of the season.

Generally speaking, if you win more than $600 for a sports wager and the amount is 300 times the original bet, the payor is required to withhold 24% of your winnings for federal taxes, according to the IRS.

There’s also a Form W-2G that you might receive from the payor, depending on how much you win. Fantasy sports players who win more than $600 generally receive a Form 1099-MISC or 1099-K, depending on how the money is paid out.

Remember, those forms also go to the IRS. And if you fail to report the income, you can pretty much count on hearing from the tax agency.

Also be aware that your final tax bill could be higher or lower than the amount withheld by the casino or other payor, depending on a variety of factors that include your other income. And even if no tax is withheld, you’re not off the hook for claiming the income on your tax return.

More from Personal Finance:
Many teens are hesitant about the stock market
Here are some ways to pay off big credit card debt
Why you should start saving for retirement in your 20s

One way to reduce what you owe on your winnings is to write off your gambling losses — if you can.

“You can deduct those losses to the extent of your winnings,” Allen said. “But, you must itemize your deductions.”

However, the majority of taxpayers do not itemize because they’re better off with the standard deduction, which was nearly doubled under new tax law that took effect in 2018.

If you are able to itemize and have gambling expenses to deduct against winnings, be sure you’d be able to back up your claims with documentation if the IRS were ever to question your tax return.

If you do win big, you should consult with a tax advisor before doing much of anything. On top of making sure you set aside enough to cover any additional money due to the IRS or at the state level, it’s worth getting guidance to ensure you don’t overlook any strategies that could reduce your overall tax burden.