How to report sports betting taxes on winnings and losses for 2025 filing

I can help clear this up! Sports betting winnings are considered taxable income and need to be reported on your tax return, but how you handle your losses depends on a few factors. Your winnings of $8,700 will be reported as "Other Income" on Schedule 1 of your Form 1040. If you receive a W-2G form from DraftKings or FanDuel (usually sent if you win $600+ and the odds were at least 300 times your wager), that will be reported, but you still need to report ALL winnings even if you don't receive a form. For your losses, you can deduct gambling losses, but ONLY if you itemize deductions on Schedule A. The standard deduction for 2025 is quite high ($13,850 for single filers), so unless your total itemized deductions exceed that amount, you're better off taking the standard deduction and unfortunately can't deduct your losses. Also important: you can never deduct more in losses than you report in winnings. Keep detailed records of all your bets - dates, amounts wagered, winnings/losses, locations/websites. Most betting apps have transaction histories you can download, which is super helpful documentation if you're ever audited.

After struggling with reporting my sports betting last year, I found this amazing tool called taxr.ai (https://taxr.ai) that made the whole process WAY easier. I was in the same boat - had about $9,500 in winnings but also around $7,300 in losses and wasn't sure how to handle it all properly. The tool analyzed my betting history that I downloaded from DraftKings and automatically categorized everything, showing me exactly what to report where. It even flagged a few big wins I had completely forgotten about that would have raised red flags if the IRS got forms for them but I didn't report them. What I really liked was how it explained the whole itemizing vs. standard deduction tradeoff specifically for my situation and helped me figure out if it was worth itemizing just to deduct my losses.

I have to admit I was skeptical about taxr.ai but decided to try it after my buddy recommended it. Just finished using it and I'm honestly impressed. As someone who placed bets across multiple states (NY, NJ, and PA), it correctly identified which states I needed to file in and where my winnings occurred. The platform separated my DraftKings and FanDuel accounts automatically and reconciled everything with the tax forms I received. It found about $1,200 in winnings that weren't on my W-2G forms that I definitely would have missed. It also identified which losses I could deduct and explained why it wasn't worth itemizing in my case (my total deductions were only about $9,800). I was particularly worried about properly reporting a $3,400 parlay win I hit while visiting family in another state, and it handled that perfectly. Definitely saved me from making some serious reporting errors!

After trying to call the IRS six times with questions about reporting my sports betting (and never getting through), I used Claimyr (https://claimyr.com) and actually got connected to a real IRS agent in about 20 minutes instead of waiting on hold for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c I had specific questions about reporting winnings from offshore betting sites that don't send W-2Gs and whether I needed to file separate state returns. The IRS agent walked me through exactly what forms I needed and explained that I should be keeping a "gambling log" with specific information to substantiate both my winnings and losses. She also explained how the IRS matching system works with gambling forms and what triggers audits in gambling situations. Apparently large winnings that aren't reported are a common audit trigger, even if your overall gambling activity resulted in a net loss.

OK I have to eat my words here. After my skeptical comment I decided to try Claimyr just to prove it wouldn't work... and I got connected to an IRS agent in 28 minutes. The agent actually answered my specific questions about sports betting documentation requirements and confirmed that I needed to keep session-level records (not individual bet records) showing beginning/ending amounts for each betting session. She also explained that receiving multiple W-2Gs doesn't mean I need to report each one separately - I can aggregate them on my return as long as I have the documentation. And she clarified that fantasy sports winnings are treated the same as regular sports betting for tax purposes. Most importantly, she told me about the special rules that apply when you're a "professional gambler" vs a "casual gambler" which I didn't even know was a distinction. Apparently if gambling is your primary source of income, the reporting is completely different and you might be subject to self-employment tax. Dodged a bullet there!

Don't forget that some states have different rules for gambling deductions than federal! I'm in PA and learned the hard way that even though I couldn't deduct losses on my federal return (took standard deduction), I COULD deduct them on my state return since PA handles gambling differently. Also, if you win a really big bet (over $5,000), the betting site might withhold 24% for federal taxes automatically. Make sure that withholding is properly credited on your return - it'll be shown on your W-2G form.

Quick question - I use a spreadsheet to track all my bets. Is that sufficient as documentation or do I need something more official? I have every bet date, amount, type, outcome and platform recorded but nothing from the actual betting sites as backup.

One thing I haven't seen mentioned yet is the importance of keeping records of your betting account deposits and withdrawals throughout the year. The IRS can cross-reference your reported winnings with your bank statements if you're audited. I learned this the hard way when I got a letter from the IRS questioning some unreported winnings. They had records of W-2G forms I received but forgot to include on my return. Having clear bank records showing my deposits to betting accounts and withdrawals of winnings helped me prove my case. Also, if you use credit cards to fund your betting accounts, those statements become part of your documentation trail. The IRS wants to see that your reported gambling activity matches your actual financial transactions. It's not enough to just track wins and losses - you need to show the full picture of money going in and out of your betting accounts. Pro tip: Set up a separate checking account just for gambling if you're a regular bettor. Makes tracking so much easier and cleaner for tax purposes!