{"id":22206,"date":"2018-03-13T11:33:31","date_gmt":"2018-03-13T16:33:31","guid":{"rendered":"https:\/\/www.hrblock.com\/tax-center\/newsroom\/the-real-gamble-is-not-paying-taxes-on-march-madness-windfalls\/"},"modified":"2023-03-01T13:02:20","modified_gmt":"2023-03-01T19:02:20","slug":"not-paying-taxes-on-march-madness-prizes-is-a-gamble","status":"publish","type":"newsroom","link":"https:\/\/www.hrblock.com\/tax-center\/newsroom\/income\/other-income\/not-paying-taxes-on-march-madness-prizes-is-a-gamble\/","title":{"rendered":"The real gamble is not paying taxes on March Madness betting"},"content":{"rendered":"

\"\"<\/p>\n

March Madness\u2019 bracketology is a hotbed of betting with billions of dollars wagered each year. Whether from an office pool, in Vegas or somewhere else, taxpayers who win, big or small, need to report their winnings as income to the IRS. Even winners of noncash pools could have tax consequences, making \u201cbragging rights\u201d the only nontaxable prize this March.<\/p>\n

Size of gamble doesn\u2019t matter to the IRS<\/h2>\n

No matter the amount, gambling winnings<\/a> are fully taxable. The larger it is, the more likely the winner \u2013 and the IRS \u2013 will receive a tax form reporting the winnings, like a 1099<\/a>-MISC or W2-G. The IRS will be able to compare the information on the taxpayer\u2019s return with the tax form reporting gambling winnings. If the winnings are significant enough, they will also be subject to mandatory withholding by the payer.<\/p>\n

\u201cFailing to report income, including gambling winnings, can result in costly penalties<\/a>,\u201d said Nathan Rigney, lead tax research analyst at The Tax Institute at H&R Block. \u201cIf you don\u2019t receive a tax form, that does not mean you\u2019re off the hook on reporting it as income. You still have a responsibility to report the income on your tax return.\u201d<\/p>\n

And Rigney warns that noncash winnings don\u2019t escape the IRS\u2019 interest, either. Even if it is a trip or just a coffee maker or gift card, winners should include the fair-market value of any noncash winnings in their taxable income.<\/p>\n

March Madness prizes are taxed even if they aren\u2019t from gambling<\/h2>\n

Gambling isn\u2019t the only way to make some money off the NCAA basketball tournament. Giveaways without a cost of entry or related to the outcome of the games could come with tax implications for the winners.<\/p>\n

\u201cIf you drain a half-court shot at halftime and win $10,000, that\u2019s taxable as well,\u201d Rigney said. \u201cThe IRS considers prizes not related to gambling as income, and if the prize is large enough, it could generate tax forms to the IRS and the winner, as well as mandatory withholding.\u201d<\/p>\n

Only winners can deduct March Madness losses<\/strong><\/h2>\n

Gamblers may deduct their losses, but only by as much as they report in winnings. So if a taxpayer entered two pools \u2013 one at the office and one among friends \u2013 at $10 each and won $100 from their office pool, they could net the entry fee from the winning pool against the income, reporting $90 in winnings.  The entry fee from the losing pool and any other gambling losses would be deducted as an itemized deduction if the taxpayer itemizes deductions, up to a maximum of $90.<\/p>\n

Two wrongs don\u2019t make a right: illegal betting and tax evasion<\/strong><\/h2>\n

Finally, Rigney warns that gambling illegally, like online gambling in most states, doesn\u2019t make the winnings tax-free. Taxpayers who make illegal wagers and win still need to report the income on their tax return.<\/p>\n

\u201cOn the bright side, if you itemize, you can still deduct the loss to the extent of gain,\u201d said Rigney.<\/p>\n

Although people tend not to think of money won from their friends or co-workers in a pool as income, it is. And because it is income, money won this March Madness needs to be reported on the tax return.<\/p>\n

Media Assets<\/h3>\n\nhttps:\/\/www.hrblock.com\/tax-center\/wp-content\/uploads\/2018\/03\/Nathan-Rigney-on-March-Madness-1.mp3<\/a><\/audio>\n

Nathan Rigney, lead tax research analyst, The Tax Institute at H&R Block (runs 0:18)
\n\u201cWhether you are participating in your office pool or gambling at a casino, if you win money it\u2019s taxable, and the IRS doesn\u2019t care where you won it or how you won it. All income is taxable from whatever source derived, unless it\u2019s specifically excluded by the IRS, and gambling winnings are not excluded.\u201d<\/p>\nhttps:\/\/www.hrblock.com\/tax-center\/wp-content\/uploads\/2018\/03\/Nathan-Rigney-on-March-Madness-2.mp3<\/a><\/audio>\n

Nathan Rigney, lead tax research analyst, The Tax Institute at H&R Block (runs 0:13)
\n\u201cYou have to report all of your income that\u2019s taxable on your tax return, and if you don\u2019t you could be subject to penalties. You also could be subject to audit for all years because it was a fraudulent return – if you knowingly left it off.\u201d<\/p>\nhttps:\/\/www.hrblock.com\/tax-center\/wp-content\/uploads\/2018\/03\/Nathan-Rigney-on-March-Madness-3.mp3<\/a><\/audio>\n

Nathan Rigney, lead tax research analyst, The Tax Institute at H&R Block (runs 0:20)
\n\u201cAny prize that you win is taxable as income and they base that on the fair market value of the item that you won. So if you won a pizza that\u2019s $25, that\u2019s taxable income. And if you paid anything to enter the drawing then you get to deduct that from the winnings.\u201d<\/p>\nhttps:\/\/www.hrblock.com\/tax-center\/wp-content\/uploads\/2018\/03\/Nathan-Rigney-on-March-Madness-4.mp3<\/a><\/audio>\n

Nathan Rigney, lead tax research analyst, The Tax Institute at H&R Block (runs 0:21)
\n\u201cIf you win more than you lose, you can deduct your gambling losses to the extent of your gambling winnings, but only if you itemize. So if this year, 2018 you win a bunch of money, you can then itemize on your 2018 return and deduct those gambling losses.\u201d<\/p>\nhttps:\/\/www.hrblock.com\/tax-center\/wp-content\/uploads\/2018\/03\/Nathan-Rigney-on-March-Madness-5.mp3<\/a><\/audio>\n

Nathan Rigney, lead tax research analyst, The Tax Institute at H&R Block (runs 0:09)
\n\u201cAs Al Capone discovered, the IRS doesn\u2019t care whether it\u2019s from a legal activity or an illegal activity, just because it\u2019s illegal doesn\u2019t make it tax free.\u201d<\/p>\nhttps:\/\/www.hrblock.com\/tax-center\/wp-content\/uploads\/2018\/03\/Nathan-Rigney-on-March-Madness-6.mp3<\/a><\/audio>\n

Nathan Rigney, lead tax research analyst, The Tax Institute at H&R Block (runs 0:06)
\n\u201cEven if you gambled illegally and won money you can still deduct your losses against that income.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

March Madness\u2019 bracketology is a hotbed of betting with billions of dollars wagered each year. Whether from an office pool, in Vegas or somewhere else, taxpayers who win, big or small, need to report their winnings as income to the IRS. Even winners of noncash pools could have tax consequences, making \u201cbragging rights\u201d the only nontaxable […]<\/p>\n","protected":false},"author":1,"featured_media":35681,"menu_order":0,"template":"","tags":[],"news-categories":[23360,23361],"class_list":["post-22206","newsroom","type-newsroom","status-publish","has-post-thumbnail","hentry","news-categories-income","news-categories-other-income"],"acf":{"post_rest_thumbnail_alt_id":null},"yoast_head":"Not paying taxes on March Madness betting is a gamble | H&R Block<\/title>\n<meta name=\"description\" content=\"Taxpayers who win, big or not, need to report their winnings as income to the IRS. 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