The recent NBA gambling scandal, which led to more than 30 arrests, has drawn widespread attention to the broader world of sports betting. The fraud involved players and coaches selling sensitive injury and lineup information for cash or a share of betting proceeds. In some cases, players allegedly influenced game outcomes – such as Miami Heat guard Terry Rozier leaving a game early due to a supposed injury – allowing co-conspirators to profit from guaranteed wagers.
Since the Supreme Court legalized sports betting in 2018, most states have followed suit, and the industry has expanded rapidly. New York, for example, is now the largest sports betting market in the country, with more than $22.6 billion in total wagers last year. While sports betting has become a mainstream pastime, it is important to remember that it is not an investment strategy. For those who participate casually, understanding the income tax implications is essential.
From a federal perspective, all gambling winnings are considered ordinary income and taxpayers must report them, regardless of the amount. Casinos and online betting platforms, such as DraftKings, are required to report certain payouts directly to the IRS, typically issuing Form W-2G when winnings exceed specific thresholds. For instance, this form may be generated for sports betting winnings over $600 that are at least 300 times the wager. Even if a W-2G is not issued, all gambling income must still be reported on an individual’s tax return (Schedule 1, Form 1040). Maintaining detailed records of wagers, tickets, and receipts is strongly advised.
This year, gambling losses can fully offset winnings for federal tax purposes if the taxpayer itemizes their deductions on Schedule A. However, beginning in 2026, the recently passed One Big Beautiful Bill (OBBBA) will limit the deduction. Federal deductions for gambling losses will be capped at 90% of losses going forward. This means an individual with $100,000 in winnings and $100,000 in losses could still owe tax on $10,000 of income despite breaking even overall.
State tax treatment adds another layer of complexity. Most states with a personal income tax also classify gambling winnings as ordinary income. However, not all states permit offsetting winnings with losses – Connecticut and Rhode Island are notable examples.
Those who gamble regularly or in significant amounts should maintain comprehensive records and coordinate with their CPA to ensure proper reporting and to plan for both federal and state tax implications. As a general rule, all gambling winnings should be reported. And remember, that “lucky” $1,000 win may ultimately amount to only about $650 after taxes. s, and prescription pricing. Those enrolled in Medicare Advantage should also review their Annual Notice of Change to confirm that their preferred providers and facilities remain in-network.
It is our strong recommendation to avoid Medicare Advantage plans and opt for Original Medicare with Medigap.
Please reach out to your Wealth Manager to discuss how these updates may affect your healthcare and retirement planning strategy.) periodically to understand exactly what you hold. Many participants aren’t aware that their plan may already include an annuity component or that they may have been defaulted into one. If your retirement accounts do include annuities, it’s a good idea to talk with your plan administrator and request more information for specifications.
Weekly Commentary
NBA Betting Scandal Highlights Tax Treatment of Gambling Income and Losses
Mallon FitzPatrick
The recent NBA gambling scandal, which led to more than 30 arrests, has drawn widespread attention to the broader world of sports betting. The fraud involved players and coaches selling sensitive injury and lineup information for cash or a share of betting proceeds. In some cases, players allegedly influenced game outcomes – such as Miami Heat guard Terry Rozier leaving a game early due to a supposed injury – allowing co-conspirators to profit from guaranteed wagers.
Since the Supreme Court legalized sports betting in 2018, most states have followed suit, and the industry has expanded rapidly. New York, for example, is now the largest sports betting market in the country, with more than $22.6 billion in total wagers last year. While sports betting has become a mainstream pastime, it is important to remember that it is not an investment strategy. For those who participate casually, understanding the income tax implications is essential.
From a federal perspective, all gambling winnings are considered ordinary income and taxpayers must report them, regardless of the amount. Casinos and online betting platforms, such as DraftKings, are required to report certain payouts directly to the IRS, typically issuing Form W-2G when winnings exceed specific thresholds. For instance, this form may be generated for sports betting winnings over $600 that are at least 300 times the wager. Even if a W-2G is not issued, all gambling income must still be reported on an individual’s tax return (Schedule 1, Form 1040). Maintaining detailed records of wagers, tickets, and receipts is strongly advised.
This year, gambling losses can fully offset winnings for federal tax purposes if the taxpayer itemizes their deductions on Schedule A. However, beginning in 2026, the recently passed One Big Beautiful Bill (OBBBA) will limit the deduction. Federal deductions for gambling losses will be capped at 90% of losses going forward. This means an individual with $100,000 in winnings and $100,000 in losses could still owe tax on $10,000 of income despite breaking even overall.
State tax treatment adds another layer of complexity. Most states with a personal income tax also classify gambling winnings as ordinary income. However, not all states permit offsetting winnings with losses – Connecticut and Rhode Island are notable examples.
Those who gamble regularly or in significant amounts should maintain comprehensive records and coordinate with their CPA to ensure proper reporting and to plan for both federal and state tax implications. As a general rule, all gambling winnings should be reported. And remember, that “lucky” $1,000 win may ultimately amount to only about $650 after taxes. s, and prescription pricing. Those enrolled in Medicare Advantage should also review their Annual Notice of Change to confirm that their preferred providers and facilities remain in-network.
It is our strong recommendation to avoid Medicare Advantage plans and opt for Original Medicare with Medigap.
Please reach out to your Wealth Manager to discuss how these updates may affect your healthcare and retirement planning strategy.) periodically to understand exactly what you hold. Many participants aren’t aware that their plan may already include an annuity component or that they may have been defaulted into one. If your retirement accounts do include annuities, it’s a good idea to talk with your plan administrator and request more information for specifications.
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