Considering the Super Bowl is in less than a week, and the NCAA March Madness Tournament is right around the corner, it’s a fitting time to highlight a few important tax items to keep in mind if you’re engaged in sports betting in Ohio.
For individuals placing bets, it’s important to be aware of the tax ramifications and reporting requirements. If you’re a licensed sports gaming proprietor (sportsbook) taking the bets, it’s crucial to understand your tax and regulatory requirements.
Ohio Sports Betting Legislation Recap
Ohio kicked off New Year’s Day 2023 with the legalization of sports gaming (betting). In December 2021, Ohio Governor Mike DeWine signed House Bill 29 (HB 29), which repealed the previous Gambling Law and allowed lawmakers to legalize and regulate sports betting in the Buckeye State for individuals 21 and older. Ohio has now joined over 30 other states where sports betting is legal, and, like many of those states, Ohio has levied taxes on the activity. Eventually, these taxes are expected to raise millions of dollars each year once the program is fully functioning and the betting markets have had time to develop.
How Will Your Individual Sports Bets be Taxed in Ohio?
For individual sports bettors, it’s important to understand how any gambling winnings and losses will be taxed at the federal and state levels. Considering sports betting is new to Ohio, perhaps you’re already asking yourself:
- Are your winnings taxable?
- Can you deduct your losses?
- On what forms are gambling winnings/losses reported?
- What amount of winnings will trigger a Form W-2G?
Are my winnings taxable?
Yes, and you are responsible for reporting all gambling winnings on your individual Form 1040 tax return. This includes winnings that aren't reported on a Form W-2G, which is used to specifically report gambling winnings and any federal, state and local income tax withheld.
Can I deduct my losses?
Conversely, you may only deduct gambling losses if you itemize your deductions on Schedule A of Form 1040. If you itemize and plan to deduct your losses, you can only claim losses to the extent of your winnings, and you should keep accurate win/loss records in addition to the appropriate supporting documentation. Generally, if you’re using an online sportsbook, you can access a “Win/Loss Statement” or “Activity Statement,” which might include information such as win/loss detail, deposit/withdraw amounts and betting history.
What amount of winnings will trigger a Form W-2G?
The IRS requires a sportsbook to issue you a Form W-2G if they pay you $600 or more in gambling winnings and if the winnings are at least 300 times the amount of the wager. The payer must withhold federal income tax from your winnings if your net winnings (winnings minus the wager) exceed $5,000 and the winnings are at least 300 times the wager. The regular federal gambling withholding is 24%. In addition, when federal withholding is triggered, Ohio requires sportsbooks operating in the Buckeye State to withhold state tax at a rate of 4% and municipal tax, if applicable.
What are the Requirements and Tax Considerations for Sports Gaming Proprietors in Ohio?
Odds are, if you’re a licensed sportsbook or interested party looking to get in on the action, you might have a similar set of concerns. Some items to keep at the top of mind are:
- Is your sports betting revenue taxable?
- What are your withholding requirements?
- What tax forms should you be aware of?
- How does the type of license you have impact your tax considerations?
Is my sports betting revenue taxable?
Yes. Sportsbooks are in the business of accepting sports wagers; therefore, your revenue from amounts wagered is subject to federal excise taxes and Ohio’s sports gaming receipts tax. Below are the applicable 2023 tax rates:
- Federal excise tax on wagers authorized by the state
- 0.25 % of the amount wagered, and an annual occupational tax of $50 for each principal or agent accepting wagers.
- Federal excise tax on wagers not authorized by the state
- 2% of the amount wagered, and an annual occupational tax of $500 for each principal or agent accepting wagers.
- Ohio sports gaming receipts tax
- 10% tax on total sports gaming receipts received by a sportsbook from operations in the state.
- Ohio Revised Code Section 5753.01 defines “Sports Gaming Receipts” as: the total gross receipts received by a sports gaming proprietor from the operation of sports gaming in this state, less the total of cash and cash equivalents paid as winnings to sports gaming patrons, voided wagers, receipts from the operation of lottery sports gaming, and after January 1, 2027, a percentage of promotional gaming credits.
What are my withholding requirements?
When a bettor’s winnings trigger reporting to the IRS, you’re required to withhold federal, state and local taxes. Once you’re required to withhold taxes, you must then file Form W-2G and Ohio IT-501 to remit the income tax withheld. These two forms are due monthly on the 10th day of the month following the end of the reporting period.
How does the type of license I have impact my tax requirements as a sports gaming proprietor?
Ohio’s sportsbooks, management services providers, and mobile management service providers are licensed and regulated by the Ohio Casino Control Commission. The Commission offers three types of licenses — type A, type B, and type C (see below). If you hold a Type A or B license, the Ohio Department of Taxation is responsible for administering your sports gaming receipts tax. If you hold a Type C license, the Ohio Lottery Commission is responsible for administering your sports gaming tax.
Keeping some of these important tax ramifications top of mind might help you avoid scrambling during the next tax season blitz.
Contact Matt Tomko at email@example.com or a member of your service team to discuss this topic further.
Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.