Beginning January 1, 2023, the state of Ohio has legalized sports gambling. As a result of this legalization, a number of sports betting apps have been created to allow sports betting to occur with the click of a button. However, sports betters need to be aware of the tax effects of sports gambling winnings.
Some of the different sports betting apps include FanDuel Sports Book, DraftKings Sports Book, Bet MGM, Caesars Sports Book, Bet 365, and Point Bet. These various apps have offered free money for individuals who sign up for the app to use to allow them to conduct sports betting. The state of Ohio has also passed legislation on how to deal with individuals who have sports betting winnings. The following are some of the items in that legislation.
Gambling winnings are taxable both by the IRS and also the state of Ohio. At the federal level, gambling losses can be deducted from gambling winnings to reduce those gambling winnings to zero if you itemize. It is also a good idea to keep documentation to prove your losses to be able to present if ever audited. At the federal level, gambling winnings are taxed at the normal income tax rates.
The state of Ohio taxes gambling winnings just like other income. Ohio has six levels of taxation for gambling winnings. For example, if an individual has under $22,150 of income, then the tax rate on gambling winnings would be 0%. However, if an individual has above $221,300 of income, then the tax on that individual’s gambling winnings would be $8,143.14 + 4.797% on any income above $221,300. The sports book app is obligated to withhold 4% of your winnings if they are over certain thresholds. Also, unlike federal income tax rules, in the state of Ohio, it appears that you cannot deduct your gambling losses at this time.
Each year sports book app operators will send tax forms showing the gambling winnings to the gamblers. Those gamblers will need to include that income on both their federal and Ohio income tax returns. Even if you do not receive such a tax form, you are still required to report your gambling winnings.
Since this is the first year of sports gambling being legal in Ohio, please make sure to contact your CPA to understand the specifics of your rights and responsibilities as it relates to reporting your winnings.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
James F. Contini II, Esq.
Certified Specialist in Estate Planning,
Trust & Probate Law by the OSBA
Krugliak, Wilkins, Griffiths & Dougherty Co., LPA
405 Chauncey Avenue NW
New Philadelphia, Ohio 44663
Phone: (330) 364-3472
Fax: (330) 602-3187