A Hidden Tax in Congress Could Hurt Sports Bettors

Congress is working on a giant bill that covers many things, but hidden inside is a rule that could quietly change sports betting in the United States.

Right now, if you bet on sports and win $10,000 over a year while also losing $10,000, you don’t owe taxes because you didn’t really make any profit. Under current tax rules, it’s a wash. Your wins and losses cancel each other out, and you don’t owe the IRS anything.

But the Senate’s version of the bill says you can only deduct 90 percent of your losses. In this same situation, you would only be able to deduct $9,000 of your $10,000 in losses. The IRS would say you made $1,000 in “income,” even though you didn’t keep any money at all. You would have to pay taxes on money that never existed in your bank account.

From Front Office Sports:

“My interpretation of how this will change for gamblers is they are trying to take a provision out of what they did for businesses with net operating losses where they limited the NOL that you could use up to 80% of your income so you’re always going to pay tax when you make income,” Joshua Horowitz, CPA and Team Leader of the professional sports division of Withum, told Front Office Sports. “With gamblers, they are limiting your losses to 90%, which may cause people to owe tax even in years that they have net losses.”

For sports bettors who operate on slim profit margins, the consequences could be severe. There’s been no shortage of doom-and-gloom on Twitter.

One professional gambler told Front Office Sports that if this rule goes into effect, it might end his career.

“If I win $100 million and lose $99 million, that would be a great year, to have $1 million in profit,” he said. “But with this bill, I would have to pay taxes on about $10 million in ‘gains,’ which would turn my year into a $2 million loss.”

For people who bet on sports regularly, including those who carefully track every wager, this proposal could make it much more challenging to continue betting legally in the United States.

This change was not included in the House’s version of the bill. It was added in the Senate, which means there is still time to remove it or alter it before it becomes law.

Rep. Dina Titus, Nevada, tweeted Wednesday she is working on a legislative fix, and a representative in her office said they have been taking calls all morning.

If you would like to have your opinion heard, contact your representative in Congress. You can find your representative here.