30-second summary

• The IRS considers all gambling winnings are income, whether or not they come from a legal source.
• Americans wagered an estimated $6bn
  
• Up to 24% of the winnings go to the tax department

From fantasy leagues to casual bets among friends, the IRS places the burden on those receiving winnings from bets to declare them to the taxman, a task that is not always easy to enforce.

Estimated $6bn wagered

According to official estimates, around 22.7m Americans will have placed bets during the Super Bowl despite being told to keep “Mom” over gambling references, with $6bn changing hands in the process. Of the bets placed, some 1.8bn will have been made via illegal streams, making it difficult for the IRS to track down winnings.

If predictions are correct, the IRS could earn an estimated $1.5bn from the Super Bowl alone, but those figures would be reliant on all winnings being declared, which is not likely to be the case. The amount taken by the IRS should increase significantly this year compared to previous years, thanks to the changes in rules in states that have legalized sports betting.

If the winnings are over $5,000 and the amount won is more than 300 times the original wager, the person paying out is responsible for withholding 24% of the winnings to pay the relevant taxes.

Players can write off their losses against their gains as long as they retain proof of their bets, which can lighten the tax burden a little in some cases. In states where sports betting has been legalized, the IRS has made the declaration system easier for those placing bets – the duty to report and pay taxation on winnings is placed with the payor (i.e. the betting operator or casino).

NFL to be winners too

Figures released by the American Gaming Association estimate that the NFL could benefit from an extra $2.3bn in annual revenue as gambling becomes widely available and regulated. The revenue could be generated by private partnerships with betting operators, as well as from increased advertising revenue that will be generated by larger viewing figures.

Nielsen Sports has put forward an estimated potential growth of 13.4% that would be generated by media rights, sponsorship deals, merchandise sales and ticketing. Data generated by the NFL could bring in further extra revenue, as much as $573m according to some estimates.

At the moment, there is no requirement for third parties to be notified of sports betting winnings outside of states that have legalized sports betting, meaning that both the IRS and the NFL could be missing out on a significant amount of income annually.

Long-term, it is hoped that taxation on sports bets will help to bridge the gap between the amount of tax received annually and the amount needed to run public services optimally.

Data from this year’s Super Bowl bets has not been widely released at this stage, but figures from states where sports betting has been legalized will be of great interest to those in favor of legalizing sports betting across all states. An increase in IRS revenue could give campaigners a significant boost.