You won big with your longshot’s first place finish. Your racing windfall is exciting, but before you buy champagne showers, you must grasp the tax ramifications.
When are Winnings Taxed?
Fortunately, you don’t have to declare every winning bet. The IRS only demands reporting gambling earnings over $600 and 300 times your wager. A $100 bet that returns $250 is not taxable, but a $2 bet that pays $600 is.
If you win $5,000 or more, the racetrack must withhold 24% for federal income tax. Your Form W-2G will show this withholding.
Best Option: Record-keepingĀ
Even if your gains are below the reporting requirement, maintain note of your racing bets, including amount wagered, date, track, and race facts. This helps if the IRS audits you. Gambling losses can be deducted from gains up to the amount on your tax return.
Friendly Reminder: Keep your betting slips and receipts to prove your wins and losses.
One Last Thought: Don’t Let Taxes Ruin Your Win
Congratulations on winning a huge racing bet, but consider tax implications. Understand the reporting obligations and keep good records to ease tax season and enjoy your winnings.
