Major sporting events such as the NBA Finals create excitement for fans. Of course, part of the excitement over who will win often comes with a large side of sports betting.<\/p>\n
For tax practitioners, the growing popularity of sports betting and changes in the law are creating tax planning challenges. Not everyone will automatically think of tax implications in the heat of the moment. Tax pros who assist both recreational and professional gamblers should look out for potential \u201cgotchas\u201d and advise clients who may not otherwise realize the tax consequences until it\u2019s too late.<\/p>\n
Sports betting has become increasingly complex, as apps are being more widely used. Gamblers can now place bets on a player\u2019s performance or participate in live in-game betting. This can be as granular as betting on which team might score the next basket or can include multi-bet wagers where someone could bet on whether the New York Knicks or the San Antonio Spurs win, the total points that they win by, and how many points a player scores.<\/p>\n
What was once simple has turned into a stream of transactions that make it harder to track wins and losses for tax reporting purposes. Practitioners should advise clients on the importance of good recordkeeping, which may involve exporting data from the app or platform used for betting, as well as keeping their own running log of wins and losses.<\/p>\n
Gambling winnings are always taxable income, even if not reported. Losses are only able to offset winnings, and generally only if a taxpayer itemizes their deductions. Changes implemented by last year\u2019s massive tax law, effective for the 2026 tax year, further limit how much of the losses are deductible.<\/p>\n
Gambling losses are limited to 90% of the total losses and those reduced losses still can\u2019t exceed gambling winnings for the year. This 90% cap also applies to professional gamblers\u2019 business expenses, such as travel or tournament entry fees.<\/p>\n
Such changes are a key \u201cgotcha\u201d for clients because tax reporting is based on gross winnings, not net results, meaning that a taxpayer who breaks even or loses money overall still may have to report taxable income. A surprise tax bill come April wouldn\u2019t be a win, so it\u2019s important for practitioners to have these conversations with clients throughout the year.<\/p>\n
It\u2019s also important to consider the various state tax differences or whether a state conforms to the 2025 tax law changes limiting losses. Knicks and Spurs fans aren\u2019t all located in New York or Texas. But for local fans, New York has a state tax to consider, while Texas doesn\u2019t have an income tax.<\/p>\n
For New York taxpayers, the state tax analysis could be quite challenging. New York does conform with the federal 90% gambling loss limitation and also imposes its own itemized deduction limitation limits. In addition, New York has a proposed bill<\/a> that would further restrict gambling-related itemized deductions if enacted. For now, that proposal is a development to watch, as it is not current law. These differences highlight the importance of state-level analysis when planning with clients.<\/p>\n Figuring out how to treat a gambling session is an unresolved issue related to gambling activity. The IRS<\/a> and US Tax Court<\/a> have acknowledged that gambling activity should be treated as a block, or a \u201csession,\u201d rather than as individual wagers because tracking every single slot pull, dice roll, or card draw is impractical.<\/p>\n A session generally is defined as a continuous period of play. How sessions are defined directly affects how much of a taxpayer\u2019s losses are subject to the 90% cap, as losses that occur within a winning session would reduce the net gain of the session.<\/p>\n But it\u2019s not clear what defines a gambling session. Is it the entirety of Game 5 of the NBA playoffs? Or something different based on when you place the bets? This is more complex with online gambling, where there is no \u201cleaving the casino.\u201d<\/p>\n Until clear guidance is provided, practitioners should work with clients to adopt and consistently apply a reasonable method for defining gambling sessions and documenting wagering activity across platforms. That may include determining in advance how a session begins and ends, retaining platform account histories and maintaining a contemporaneous log to support the taxpayer\u2019s reporting position if later questioned. Failure to have these conversations may result in difficult discussions when filing 2026 returns or even later if the return is examined.<\/p>\n And because the San Antonio Spurs have two former UNC Tar Heels on their roster, I must honor my alma mater and say: Go Spurs!<\/p>\n This article does not necessarily reflect the opinion of Bloomberg Industry Group Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.<\/p>\n Author Information<\/p>\n April Walker<\/a> is lead manager for tax practice and ethics at the American Institute of Certified Public Accountants and Chartered Institute of Management Accountants.<\/p>\n Interested in writing? Review our author guidelines<\/a>, and submit pitches to Insights@bloombergindustry.com.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Major sporting events such as the NBA Finals create excitement for fans. Of course, part of the excitement…\n","protected":false},"author":2,"featured_media":699465,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[64],"tags":[302674,120824,302676,179162,302675,302672,58067,355,99,57678,302673],"class_list":["post-699464","post","type-post","status-publish","format-standard","has-post-thumbnail","category-nba","tag-business-expense-deductions","tag-excise-tax","tag-gambling-regulation","tag-individual-income-tax","tag-irc-conformity","tag-limitations-on-deductions","tag-mobile-applications","tag-nba","tag-sports","tag-state-tax","tag-wagering-losses"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/699464","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=699464"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/699464\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/699465"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=699464"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=699464"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=699464"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}