Sports betting taxes, start to finish

Two separate bills, computed two different ways. Most of the surprises are in the second one.

Sources last checked 2026-10-11.

Federal, in three sentences

Every dollar you win is taxable income, whether or not anyone sent you a form. Losses come off only if you itemize, and only up to your winnings. From tax year 2026 you may deduct just 90 percent of your losses, so breaking even now produces taxable income.

Take the standard deduction, which most filers do, and the losses do nothing at all. Your gross winnings are taxed in full.

The state bill is where people get hurt

11 states tax your gross winnings and allow no deduction

South Carolina, Illinois, Rhode Island, Indiana, Kansas, Louisiana, Utah, Ohio, Vermont, Wisconsin, Connecticut. In these states a bettor who finished the year down still owes state tax on every dollar they won. Utah's taxpayer tax credit is a share of the deduction your federal return takes, so it can give part of that back to a filer who itemizes losses federally.

A further 14 states and DC allow the deduction only to filers who itemize on the federal return. Take the standard deduction and you are in the same position as someone in a no-deduction state, whatever the state’s rules say on paper.

For 2026, 9 states have no income tax at all: Alaska, Florida, Nevada, South Dakota, Wyoming, Washington, New Hampshire, Tennessee, Texas.

Why the two bills behave so differently

Federal tax tracks your net position only if you itemize, and only roughly. You may deduct 90 percent of your losses, and never more than your winnings, so even a year you broke even leaves some winnings taxed. If you take the standard deduction, federal tax does not track your net position at all. State tax often starts from a figure that has already had the winnings added and the losses removed, or never allows the losses in the first place. So the state bill can scale with how much you wagered rather than with how much you kept.

That is why a heavy loser who itemizes can owe no extra federal tax on their winnings and thousands to their state.

Every state

Sources

Every source below is a statute, an IRS document or official form instructions.