If you were lucky enough to win big on bets made during the March Madness men’s and women’s NCAA tournaments, you may need to set aside some of your winnings for taxes. Tens of millions of Americans bet billions of dollars on NCAA tournaments each year, with an estimated 68 million people betting $15.5 billion on the men’s division alone last year. This year’s numbers are expected to be even higher, including bets on the women’s tournament. The tax implications of these winnings should be considered when filing your 2023 tax return, due on April 15 for most people.
All gambling winnings, including those from March Madness bets, are subject to federal income tax and may also be subject to state tax, depending on where you live. If your winnings minus your bets are at least $600 and were placed through a legal sportsbook or online sports betting site, you should receive a tax form W-2G from the entity that paid you. Even if you don’t receive this form, you are still required to report your winnings on your tax return. If your winnings exceed $5,000, the entity may be required to withhold 28% for federal taxes, and it will be up to you to reconcile on your tax return.
While it may be disappointing to lose money on March Madness bets, there is a potential silver lining when it comes to taxes. Gambling losses can be used to offset gambling winnings for the same tax year, but only if you itemize your deductions on your federal return. You can deduct the actual cost of wagers as well as expenses related to the gambling activity, such as travel to a casino. However, you can never deduct more than your gambling winnings, and surplus losses cannot be carried forward to future tax years.
If you won $1,000 on gambling activities in 2023 but lost $1,500 on March Madness bets, you can fully offset your winnings if you itemize your deductions. This means you won’t owe anything to the IRS for those winnings, but you will have to absorb the extra $500 in losses. It’s important to keep accurate records of your gambling activities and losses if you plan to deduct them on your tax return. Only about 10% of taxpayers normally itemize deductions, so this strategy may not be beneficial for everyone. Overall, it’s essential to consider the tax implications of your March Madness bets when filing your tax return to avoid any surprises or penalties.
