Short Answer: Sure do!

Long Answer: Did you know our neighbors to the north don’t tax gambling winnings? If you are a Canadian citizen and you win a $1 billion jackpot in Canada, you keep all $1 billion (assuming you’re a casual gambler).

U.S. Tax Law: Yes, gambling winnings are taxed in the United States. When you are a U.S. citizen, all of your income is taxable. Ever heard of Al Capone? When he went to prison, it wasn’t for the crimes he committed—it was for not paying taxes. The IRS will tax you on your income even if the activity you did to earn it is illegal.

International Winnings: Even if you win money in a country where gambling winnings aren't taxed (like Canada), if you're a U.S. citizen, you’re taxed on your global income regardless of where you were when you earned it.

Citations:

https://www.irs.gov/taxtopics/tc419

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/amounts-that-taxed.html

Short Answer: If you think it is, it probably is.

Long Answer: If you place a bet and walk away from that bet "ahead," it’s taxable gambling income. Some examples:

● Lottery Tickets: You buy a Powerball ticket for $5 and win $100K. Your taxable winnings are $99,995.
● Casino Games: Sit at a blackjack table with $10K and leave with $20K? You have $10K in gambling income.

As ridiculous as this sounds, the following would count as gambling winnings:

● If you are in a Fantasy Football league with your buddies and you win $500 at the end of the year, that counts.
● If you walk into a casino and play one blackjack hand and win $10, that also counts.
● If you bet $1 on a slot machine spin and get $2 back, meaning that you made $1, that absolutely counts.

(Whether or not people actually report their winnings in these scenarios since they didn’t get issued a tax form is another story.)

Citation: https://www.irs.gov/taxtopics/tc419

Short Answer: Two most common scenarios are:

1) You hit a slot machine win for $2,000+ on a single spin
2) You win at least $2,000 on a sports bet AND the winnings are 300x the bet amount (most common example would be a $5 to win $2,376.56 10 leg first touchdown scorer parlay or something ridiculous like that)

Long Answer:

There are other ways to get a tax in the gambling universe, but they are much less common. Other triggers include:

● $2,000+ from a keno game
● $2,000+ from a bingo game
● $2,000+ net winnings (after buy-in) from a poker game
● $2,000+ from a sweepstakes, wagering pool, lottery, horse racing, or Jai Alai AND the winning are 300x the bet amount

Withholding, which is when the casino/sportsbook/whoever actually takes a portion of the winnings and sets them aside for taxes on your behalf, will happen if:

● The net proceeds (winnings - bet amount) from the gambling activity are $5,000 or greater AND the winnings are 300x the bet amount
● 24% is the withholding rate for federal taxes. THIS IS NOT THE SAME AS WHAT YOU ACTUALLY OWE. What you actually owe would be dependent on your overall income for the year and your personal marginal tax bracket that you are in. Think of the 24% withholding as a deposit toward your taxes—not your final tax rate. The sportsbook or casino sends 24% to the IRS when required, but your actual tax on the winnings is determined when you file your tax return. Depending on your overall income, your effective tax on those winnings could be lower or higher than 24%.

● Ex: Let’s say you place a $10 NFL parlay and win $8,100. Your net proceeds would be $8,090. Since the net proceeds are greater than $5,000 AND they are greater than 300x your bet amount (800.9x in this case) then you would be subject to the 24% federal withholding tax. $1,941.60 would be withheld for federal taxes, so your take home winnings would be $6,148.40. Let’s say at the end of year your overall income for the year was $80,000 not including the parlay win. That parlay win was responsible for taking your income from $80,000 to $88,090. Assuming you are a single filer, you would be in the 22% tax bracket for tax year 2026. Therefore, even though 24% was withheld, you only owe on 22% of the winnings, so you would get that 2% difference back as a refund, which would be $161.80 in this case.

Citation: https://www.irs.gov/instructions/iw2g

Short Answer: No

Long Answer: Since the winnings are only 6.2x your bet amount, it doesn’t trigger the 300x threshold, even though it’s $6,200 which is over the $2,000 threshold. However, if this were a $5 bet to win $6,200, then you would get a W2-G because the winnings were at least $2,000 AND over 300x your bet amount.

Citation: https://www.irs.gov/instructions/iw2g

Short Answer: No

Long Answer: This is basically the same answer as question 4. Since the winnings are only 36x your bet amount, it doesn’t trigger the 300x threshold, even though it’s $3,600 which is over the $2,000 threshold. However, if this were a $10 bet to win $3,600, then you would get a W2-G because the winnings were at least $2,000 AND over 300x your bet amount.

Citation: https://www.irs.gov/instructions/iw2g

Short Answer: The government is behind the times.

Long Answer: We agree — it would make perfect sense. However sometimes tax doesn’t, especially since Congress passed a law in 1977 that made $1,200 the reporting threshold and didn’t update it to the $2,000 number until 2026 - that’s 49 years without an update!

In theory it would be extremely easy to do. You make a requirement for all licensed online sportsbooks and casinos to calculate your net win/loss at the end of the year, put it on a tax form, and then send that to the IRS. While this would not work for in-person wagering because it is too hard to track, it would be a cakewalk to do online.

There are multiple theories as to why they don’t make it a bigger priority to fix this, you can decide for yourself why you think they do it this way:

● Theory #1: The government is too lazy/stupid/uninterested to change anything

● Theory #2: All of the major sportsbooks/casinos such as Fanduel, DraftKings, etc. do not want this change because if any of their customers had to deal with tax forms, it would be bad for business. There is no way to get an exact number or statistic for this but most casual gamblers do not report any winnings or losses unless they get a tax form. The moment you get a tax form saying you owe $478 at the end of the year is the moment some people walk away from gambling for good. Gambling companies do not want this.

● Theory #3: Most gamblers are net losers anyways so it is simply not worth it

Citation: https://www.pymnts.com/legal/2026/fanduel-and-draftkings-fund-41-million-lobbying-effort-by-super-pac/

Short Answer: It *technically* wasn’t gambling and was *technically* considered a prize/fantasy sports/etc even if it acts/feels/looks like it was gambling.

Long Answer: Daily fantasy sites (like FanDuel Fantasy) follow different rules than traditional sportsbooks or casinos.

• Online casinos/sportsbooks: W2-G
• Fantasy sports/Sweepstakes apps: 1099-MISC if net winnings exceed $2,000

You must file a 1099-MISC for each person you paid during the year if:

● You paid at least $10 in royalties or broker payments instead of dividends or tax-exempt interest.

● You paid at least $2,000 in any of the following:
○ Rents
○ Prizes and awards
○ Other income payments
○ Medical and healthcare payments
○ Crop insurance proceeds
○ Cash payments for fish (or other aquatic life) purchased from someone in the trade/business of catching fish
○ Generally, cash paid from a notional principal contract to an individual, partnership, or estate
○ Payments to attorneys
○ Fishing boat proceeds

This is where it gets really silly. If you placed a $10 bet on a sportsbook for Patrick Mahomes to throw for 250 yards or more, that would be subject to the W2-G rules since it is a sports bet. If you “entered” a competition on a daily fantasy sports site for $10 and selected “Yes” on the question of “Will Patrick Mahomes throw for 250+ yards” then that is subject to the 1099-MISC rules because it's technically not a sportsbet.

There are also things called “social casinos” where maybe you pay $10 for 10 “coins” to play with and then you bet coins which are technically not real money and maybe you turn your 10 coins into 30 coins on the blackjack table and then you can redeem your 30 coins for $30 and you technically won a $30 “prize” instead of having gambled. Honestly, kind of similar to what arcades do, you pay for coins and then earn tickets by playing games and then redeem those tickets for real prizes.

Does this make any sense whatsoever when in reality both of these scenarios are clearly still gambling? Not at all. Is that just how it is? Yes.

Citations:

https://support.fanduel.com/s/article/Taxes-with-FanDuel-Sportsbook
https://support.fanduel.com/s/article/Taxes-with-FanDuel-Casino
https://support.fanduel.com/s/article/Taxes-with-FanDuel-Daily-Fantasy

Note: Some of the info on the Fanduel links is still outdated with information for tax year 2025 (claiming $600 is the threshold instead of $2,000). I would expect it to be updated by January 31, 2027.

Short Answer: Yes!

Long Answer: Also yes.

Citation: https://www.irs.gov/pub/irs-utl/OC-5TipsonGambling.pdf

Short Answer: It is very unlikely anything would happen, but that IS NOT a good reason to not report.

Long Answer: The IRS has their ways. Here’s a good real world example for you. A Boston police officer got 6 months probation in 2022 and then got charged and then pleaded guilty to failing to report $10k of gambling income from a lottery ticket he sold. In May 2020 a Boston police officer sold a winning lottery ticket worth $10k to a convenience store owner for cash rather than properly claiming the lottery winnings. Sounds pretty under the table to me, some guy buys a lottery ticket, wins $10k on the ticket, sells it to another agreeing party for cash, the purchaser of the ticket cashes it as if it's his own. So what happened? Big brother is what happened. The IRS doesn’t disclose all of its measures in “catching people”, but believe they are working on it.

Citations:

https://www.irs.gov/compliance/criminal-investigation/boston-police-officer-agrees-to-plead-guilty-to-tax-charge

https://www.universalhub.com/2022/boston-cop-gets-probation-role-lottery-ticket-tax?utm_source=chatgpt.com

Take a look at this audit report: On 9/30/24 the US Treasury Inspector General for Tax Administration released an audit report titled: The IRS Could Collect Over a Billion Dollars in Taxes From Unreported Wagering Income. In this report the US Department of the Treasury formally addressed the IRS with a study they completed which highlighted all the lost tax revenue in the gambling industry. And you guessed it, sports betting & online gambling is in the cross hairs. A recommendation the Treasury made to the IRS is quoted:

“Expand the wager codes to specifically include sports betting and use the wager code as a tool to identify potential noncompliance..”

In response the IRS is quoted:

“The IRS partially agreed with this recommendation and will explore the potential productivity and feasibility of expanding the wager codes to specifically include sports betting.”
Another recommendation the Treasury made to the IRS is quoted:

“Conduct an environment scan of the current and potential future conditions of the sports betting and online gambling industries, the industries’ risks, and the impact on tax compliance, and develop a process to identify and address underreporter noncompliance.”

In response the IRS is quoted:

“The IRS agreed with this recommendation and will conduct an environment scan of the current and potential future conditions of the sports betting and online gambling industries, the industries’ risks, and impact on tax compliance, and update existing or create new charters to identify noncompliance.”

We can see from these sources here that the IRS & Treasury Department are starting to take notice of the growing industry. It is a generally accepted fact that the average Joe is not tallying up all of his in person casino trips and online sports bets and properly reporting them at the end of the year. As the industry continues forward so will the government in their compliance requirements.

Imagine this, in the year 2030 the IRS or Congress come out with new regulations that now cause all the current “unreported” gambling income to get on a tax form in one way or another. Now on your 2030 tax return you have a “new tax form” showing gambling income of 20k.

No worries, you file the 2030 tax return and report the income and all is well. Until 2 months after you file your tax return you receive a tax deficiency notice from the IRS for years 2024-2029 for under reported gambling income. See, the IRS knew about the transfers to your bank from xyz app, they just couldn’t put their finger on it. And now, well, too easy…

Remember: Al Capone got caught on tax evasion, not the crimes he and his goons committed.

Citation: https://www.oversight.gov/reports/audit/irs-could-collect-
over-billion-dollars-taxes-unreported-wagering-income?utm_source=chatgpt.com

Short Answer: In the vast majority of cases, no.

Medium Answer: Criminal tax prosecution is exceedingly rare. Each year, the IRS receives more than 160 million individual income tax returns, yet IRS Criminal Investigation (IRS-CI) initiates only about 1,000 legal-source tax crime investigations annually. In Fiscal Year 2024, the IRS received more than 161 million individual returns while IRS-CI initiated 986 legal-source tax crime investigations. Although these investigations may involve returns from multiple tax years, this equates to approximately 0.0006% of the number of individual returns filed—or roughly one legal-source criminal tax investigation for every 163,000 individual returns.

Long Answer: Here’s what typically happens:

● If the IRS detects unreported gambling income (and yes, they have ways of finding out), they will issue a Notice of Underreported Income. This letter essentially says:

○ “We believe you actually had $20,000 in gambling income, not $0 as reported. Here’s the tax you now owe, plus penalties and interest.”

● You’ll then have 30 days to respond:

○ If you agree, you simply pay the balance, it’s a done deal, and you no longer need to worry about it.

○ If you disagree, you must send documentation to support your original filing—such as a gambling log, wagering records, win/loss statements, or whatever the IRS tells you to send as proof.

● If you ignore the IRS notices or you fight it and lose:

○ You’ll receive a Balance Due Notice. If you pay it, you can forget about it, you are free & clear.
○ Continued silence leads to IRS collections.

○ Then come threats of asset levies or wage garnishment.

○ At this point, you likely need an attorney—not just a CPA or EA—because only attorneys can offer attorney-client privilege. And at this point you will cost yourself a lot without it.

○ Even so—still no jail time. At least not yet.

So when does jail happen?

Jail time typically results only from criminal tax fraud or tax evasion. For example, when someone knowingly files a false tax return or hides income. This is rare and usually involves large amounts or clear, willful deceit. If you are also suspected of local crimes, don’t put it past your local detective to give the IRS a call about all your unreported “business” income.

But unless you’re engaged in intentional fraud of large amounts or you have other criminal activity, you’re likely looking at penalties and a payment plan, not prison bars.

“But I knowingly filed false tax returns without the gambling income?” – True, you did, so technically you could still be charged with tax fraud. However, just because you are charged with tax fraud and then later convicted, a judge will still need to determine your sentencing as “they see fit” which could range anywhere from fines & restitution, to probation, to jail time. 9.5 times out of 10, you will just have penalties, interest, & a payment plan with the IRS moving forward.

Citation: https://www.irs.gov/statistics/soi-tax-stats-all-years-irs-da
ta-book

Additionally, FedorTax claims that the: “ ‘unofficial’ minimum amount of taxes owed before the IRS will choose to file criminal charges is around $70,000, in cases involving multiple years of fraud. I am not affiliated with this firm in anyway, just figured it could be worth sharing.

Citation: https://www.fedortax.com/en/understanding-tax-fraud

Short Answer: Only on your portion but you better be able to back it up with a gambling log.

Long Answer: You only owe tax on your portion. If you are able to have the payout be split between your accounts, then all you need to do is document the payout in your gambling log

“But what if all of the money was/will be paid into my account? And then I have to send it to them?”

Steps to Split Winnings:

Scenario 1 - You get a W2-G tax form:

Try to use Form 5754 to report each individual’s share. This form should be given to the payer (e.g., casino) listing each winner’s name, address, SSN, and share of the winnings PRIOR TO PAYOUT. The payer will then issue separate tax forms to each winner for their respective amounts. If you or the payer are unwilling/unable to do this for whatever reason, go to question 12.

This is most common when hitting something like a $100,000 jackpot or higher.

SCENARIO 1 IS ONLY AN OPTION IF YOUR WIN WAS BIG ENOUGH TO TRIGGER A W2-G!!!

Scenario 2 - You don’t get a W2-G tax form and do it the proper way:

● Report the full winnings on your tax return on Schedule 1
● Subtract the portion paid to others as a “nominee distribution” also on Schedule 1
● Clearly label the deduction on your return as a "nominee distribution for gambling winnings"
● Document the payout in your gambling log
● Note: You do not need to issue a 1099-MISC to the person you are splitting the winnings with IF you are not in the trade or business of gambling and are a casual gambler.

Scenario 3 - You don’t get a W2-G tax form and do it the “wrong” way:

Some people may say “screw it” and just put down whatever their take home portion was. For example, let’s say you won $7,000 on a sportsbet and you kept $5,000 of the winnings and paid your buddy $2,000. You may be tempted to just put $5,000 down on your return to make life easy.

While this is tempting, in the event of an IRS questioning or audit, they would see the $7,000 deposit into your bank account and deem that as income and now the burden of proof is on you to explain away the $2,000 you paid to your buddy. If you had done the nominee distribution at the time of filing your return, your case would be stronger against the IRS inquiry.

However, some people chose to do this anyways and have a really solid gambling log as their proof in case they get questioned; as a nominee distribution in and of itself may bring more attention to the situation. In fact, a nominee distribution deduction would increase the audit risk of your tax return. So when you don’t receive a tax form, if you report the net and keep a good record of your split payout, that will suffice in an audit of your income.

In either situation, whether your gambling income or nominee distribution deduction are audited, you would be showing the same documents to prove what happened. So why not just lower your audit risk and report the net? I would.

Citation: https://www.xoatax.com/tax-implications-shared-gamblin
g-winnings/

Citation: https://www.irs.gov/instructions/i1099mec?utm_source=
chatgpt.com

Citation: IRS Publication 525: https://www.irs.gov/forms-pubs/about-publication-525. And IRS Form 5754 Instructions: https://www.irs.gov/forms-pubs/about-form-5754 - Each of these point to 1. Reporting your gambling winnings, not someone elses & 2. Splitting income that was given/reported to one person

Short Answer: No, you are not out of luck, but it does complicate things.

Long Answer: Let’s take a look at an example. Let’s say you contribute $15 to a bet and your buddy contributes $5 to the bet so together you place a $20 bet on your Fanduel account. You win $20,020 total (a $20,000 profit), but the winnings are paid directly to your bank account and you get a W2-G entirely in your name and you can’t file the form 5754 to get the clean paper trail:

● Make a “nominee distribution” adjustment on your return to deduct the portion given to your buddy.
● In this case, you would put down the $20,000 in winnings to match the W2-G that you got and then also do a $5,000 nominee distribution since your friend’s contribution made up 25% of the bet amount therefore he should be entitled to 25% of the winnings.

Now the tricky part is that this is not a standard thing to do on a tax return. It is possible that you may receive a letter disallowing the nominee deduction. In that case, you would need a detailed gambling log documenting the event. If you don’t have clear proof to back it up, there's a chance it gets disallowed.

By this point in the guide you may be starting to see the reason as to why some people (even though they shouldn’t) don’t report anything unless they get a form for it. Unfortunately the current rules do not make reporting gambling winnings easy.

Citation: ???????
IRS Publication 525: https://www.irs.gov/forms-pubs/about-publication-525. And IRS Form 5754 Instructions: https://www.irs.gov/forms-pubs/about-form-5754 - Each of these point to 1. Reporting YOUR gambling winnings, not someone elses & 2. Splitting income that was given/reported to one person

Short Answer: It’s exactly what you think it is/needs to be. It’s a full log over the course of the year of all your gambling activities.

Long Answer: The IRS requirements for a gambling log are as follows:

• Date and type of wager
• Establishment name/location
• Names of people with you
• Amounts won or lost
• Supporting documentation: W2-Gs, tickets, canceled checks, credit records, bank withdrawals, etc.

Note: Your log must be updated continuously and supported by verifiable documentation. The IRS expects your gambling log to be maintained on a continuous basis—not something you throw together at the last minute if you're audited. If your log appears to be backdated or created hastily, its credibility may be questioned.

In addition to keeping your log up to date, you must also retain verifiable documentation. A gambling log alone may not be enough to support your claims. These additional documents include:

• W-2G forms
• Wagering tickets
• Canceled checks
• Substitute checks
• Credit card records
• Bank withdrawal records
• Win/loss statements from the gambling establishment

Think of it like running a business, you wouldn’t deduct an expense without a receipt. Treat your gambling records the same way: detailed logs supported by reliable documents. The more supporting proof you have, the stronger your case will be if the IRS ever questions your filings.

Citation: https://itap1.for.irs.gov/owda/0/resource/Commentary_Fi
les_Redirect_ITA/en-US/help/Records.html

NOTE: This is for Boost clients only. If you are not a Boost client please ignore this. We maintain your gambling log for you throughout the course of your time at Boost. Sometime in January we will email your gambling log to you for the prior calendar year. If you have any questions about this you can reach out to your consultant. Click here for an example of our gambling logs.

Short Answer: Sadly, yes.

Long Answer: This is a very unfortunate setup for gamblers. In order to itemize on your taxes, you have to give up the standard deduction. For single filers in 2026, the standard deduction is $16,100.

Let’s say you have $17,230 in gambling winnings and $13,230 in gambling losses, meaning that you had a net profit of $4,000 over the course of the year. In order to get that deduction, you would have to give up the standard deduction of $16,100.

In this specific case, that makes no sense and you would just keep the standard deduction as it’s a higher amount. Therefore, you would put $17,230 in winnings and $0 in gambling losses resulting in paying taxes on $17,230 worth of income when you really only had net winnings of $4,000.

Assuming that you are in the 24% federal tax bracket, you would only $4,135.20 in taxes on $4,000 of net winnings meaning you walked away -$135.20 on the year after accounting for taxes.

THIS IS REALLY STUPID, IT MAKES NO SENSE, AND SHOULD MAKE YOU REALLY MAD.

It would technically be a fraudulent tax return if you just put down $4,000 as your net winnings instead of putting down the $17,230 in winnings and then backing out the $13,230 as an itemized deduction.

This is the full circle moment in this guide where you can really start to understand why some people don’t report if they don’t get a tax form. They just claim ignorance and say they never tracked anything throughout the year because it's too much hassle to keep track of it all and if they ever get audited they will deal with it then.

Some people will just put down their net winnings number (in this case $4,000) and just call it a day.

This is not a recommendation for you to do that. You should not do that. This is simply meant to show you how ridiculous this system is.

Citation: https://www.irs.gov/taxtopics/tc419

Short Answer: Yes, that is what you are required to do legally. However, the session rule can be your saving grace.

Long Answer: Again, very very few people are actually going back and doing all of this even though everyone is legally required to do so. Your saving grace here will be the session method.

The IRS has what is known as the Session Rule for calculating gambling wins and losses.

What is a Gambling Session?

A gambling session is defined by the IRS as a continuous period of play at a single gaming establishment. A session starts when you begin play and ends when:

● You stop gambling and cash out.
● You take a break.
● You switch game types (e.g., slots to blackjack).

Powerball Example:
● You buy a Powerball ticket on Tuesday.
● The drawing is on Wednesday.
● Your session starts Tuesday and ends with the drawing Wednesday.
● Your net outcome (win or loss) from that single ticket is your gambling result for the session.

Slot Machine Example:

Session #1:
● You enter the casino and put $1,000 into a slot machine.
● You play for 1 hour, winning and losing intermittently.
● You cash out with $1,750.
● Your gambling winnings from this session are $750.

Session #2:
● After dinner, you return to the casino and gamble the $750 you won earlier.
● You lose the entire amount in 30 minutes.
● This is a separate gambling session and must be reported as a separate $750 loss on your tax return on Schedule A. This loss is not netted against your winnings from earlier in the day.

Switching Machines or Game Types
● If you switch slot machines but continue playing the same type of game without taking a break, it is still considered one session.
● If you switch from slots to blackjack, your session ends with the slot game and a new session begins with blackjack.

Example – Continuous Slot Play:
● You play on one slot machine for 1 hour, then another for 1 hour.
● You stay on the casino floor and don’t take a break.
● These are part of the same session.

Example – Game Switch:
● You cash out your slots and start playing blackjack.
● That’s the start of a new session, because you changed game types.

Summary:
● Play must be continuous.
● You must stay within the same game type.
● If you take a significant break or change game types, it resets your session.

Citation: https://www.irs.gov/pub/irs-drop/n-15-21.pdf

I (Craig) am the only person I know who has ever done this on their return. It was miserable and took me about 30-40 hours to do for 2024. Here is my gambling log from 2024 of every single sports bet, slot machine spin, etc.

I am typing this as of August 25th, 2026 and I have still not received my refund from the state of Pennsylvania. I submitted my return for tax year 2025 in February 2026. It almost feels like I am getting punished for doing it by the book because my “churn” rate is so high that I have over a million dollars in wins and a million dollars in losses. Since I can’t just net the wins and losses out and put down one clean number, my return almost certainly got flagged for an obnoxiously high amount of itemized deductions. Here’s the letter I got in the mail about my return in case you are curious. They said that the amount I put on my return did not match the 1099’s or W2-G’s received. Duh! Not every gambling activity you have triggers a form. At this point I will just be happy if I get my refund by the end of the year.

The worst part is that I had a losing year in 2025. Could have just put nothing down on my return and they never would have known and wouldn’t have to deal with all of this. It’s a shame that they make it so difficult to comply with the rules because it pushes people towards not following them! Nothing in this story is advice, I am simply ranting and sharing my experiences.

Short Answer: Yes! If you can't withdraw the funds during the promotional period, you can treat all gambling activity within that promotion as part of a single session.

Long Answer: Let’s take a look at two examples:

Example #1: Poker Tournament

● You enter a 7-day poker tournament with a $1,000 buy-in.
● After Day 1, you have $5,000 in chips. After Day 2, you’re down to $1,000. So do you have $4k of income to report from day 1 and a separate $4k loss to report from day 2? No. Since you are still actively participating in the tournament and cannot withdraw your winnings until the event ends or you are eliminated.
● The entire 7-day period is considered one gambling session under IRS rules, even if you stop playing temporarily each day.
● This principle applies even if you play multiple types of poker or card games within the tournament (like 5-card draw, Omaha, or Texas Hold'em). As long as it's part of the same tournament it’s treated as one continuous session.
● Bottom Line: If you don’t yet have access to your money, your play counts as one session—regardless of the number of days, breaks between games, or variety of games played during that event.

Example #2: Online Promotion

● A sportsbook requires you to bet $200 and meet a 5-day playthrough requirement before unlocking any winnings.
● All bets during this promo period can be treated as one session, since you were still “playing” and didn’t have an accession to wealth until the promo ended.
● Bottom Line: If funds are locked up or contingent on a full playthrough, you’re still actively gambling. Treat it as a single session until you have access to your funds.

Here is a court case which references how the session rule is calculated. We can see the courts mention that “a casual gambler is to recognize a wagering gain or loss at the time he or she redeems tokens”. We can interpret from this that if your proceeds are not paid out yet/available for you to transfer to your bank, then your session is not complete.

Citation: https://www.journalofaccountancy.com/news/2009/dec/2
0092454/

Short Answer: Yes, but you must follow proper procedures to report it correctly

Long Answer: Let’s look at an example. Let’s say that Fanduel Casino has a 100% deposit match promo up to $1,000. So you deposit $1,000 of your own money and Fanduel matches it with $1,000 giving you a total of $2,000 to play with. Your gambling partner is a math wizard and based on the terms and conditions he found a way to complete the playthrough requirement on the promotion so that you expect to make money from it, although you could still lose.

You and a partner have an agreement in advance that if you win anything during your gambling session, you keep 40% of the net winnings and they keep 60% of the net winnings. If you lose any money during the gambling session, your partner covers 100% of the loss for you.

Scenario 1: You win $2,500 during your gambling session

● In this case, per your pre-arranged agreement, you would keep $1,000 of the net winnings and $1,500 would go to your gambling partner.
● In this case, simply refer back to questions 11 and 12 in this guide since you can treat the session the same way as you would a single bet.

Scenario 2: You lose $1,000 during your gambling session

● In this case, per your pre-arranged agreement, your partner would owe you $1,000 to cover your loss.
● In this case, you would not have any income to report and your partner would have a $1,000 loss.
● Note: You cannot do a nominee distribution on a loss. Again, just make sure to keep a detailed gambling log and don’t claim a loss that isn’t yours to claim. That would be the equivalent of going to the horse track and picking up random losing tickets off the floor that people throw away and claiming them as your own to get the tax benefit.

Citation: ?????

IRS Publication 525: https://www.irs.gov/forms-pubs/about-publication-525. And IRS Form 5754 Instructions: https://www.irs.gov/forms-pubs/about-form-5754 - Each of these point to 1. Reporting YOUR gambling winnings, not someone elses & 2. Splitting income that was given/reported to one person

Short Answer: Sadly, yes.

Long Answer: If you thought it couldn’t get any stupider or more confusing, we have officially hit the peak.

Assuming that you are already doing all the following:

● Making a good faith effort to track all of your gambling activity throughout the year (which requires a ton of effort)
● Taking the time to separate your gambling wins from your gambling losses
● Getting win/loss statements and supporting documentation from any online sportsbooks/casinos
● Having enough gambling losses throughout the year to make itemizing better for you than taking the standard deduction
● Being an upstanding member of society and actually reporting your winnings and losses separately even though most people aren’t
● Doing the research and reading guides like this to make sure you are doing everything right

Then the IRS hits you with the cherry on top and says: hey if you had $100,000 in wins and $100,000 in losses in 2026, you can only put down $90,000 in losses so now you owe taxes on $10,000 of “phantom income” that you never had.

Personal Opinion (Craig):

At this point it may feel like we need a modern day Boston Tea Party because this is just so fundamentally Un-American.

This 90% loss rule was a last minute provision snuck into the OBBBA (more commonly known as “The Big Beautiful Bill”) a few days before it was passed and there wasn’t enough time to sound the alarm bells and get it overturned. The average member in congress is a 79 year old with dementia who is probably locked out of their Facebook account because they can’t remember their password. If they even knew that this was part of the bill, they certainly did not understand it or care since there were way more important things in it.

There has been a bipartisan effort since to get this overturned but it's not looking too hot as of the day of writing this August 25, 2026. Even Ted Cruz (R) is co-sponsoring a bill along with a bunch of democrats I have admittedly never heard of before. When do Republicans and Democrats ever legitimately try to work on something together? Never!

It is my personal opinion that this will get overturned but not until enough people actually get burned by it first. I think the government will only act once it becomes a major problem.

Ex: Let’s say Dana White (the UFC guy with a ton of money) has $50,000,000 in gambling wins in a year and $51,000,000 in losses so he has a net loss of $1,000,000 but since he can only write off 90% of his losses he has to put down $45,900,000 for his loss amount on his return and now has to pay taxes on $4,100,000 of “phantom income” when in reality he ACTUALLY LOST $1,000,000. SOMEBODY MAKE IT MAKE SENSE!

In a perfect segway to my next question, you can actually bet on Kalshi (a prediction market) on when/if this law will be overturned. Note: This is not an endorsement of Kalshi in any way shape or form

Citation: https://community.freetaxusa.com/kb/articles/264-one-bi
g-beautiful-bill-act-s-effect-on-gambling-losses

Citation: One Big Beautiful Bill Act Section 70114 – Amended former section IRC 165(d)

Short Answer: It’s 100% blatantly gambling even if it’s treated differently from a regulatory/tax/legal/marketing perspective (similar to daily fantasy sports or sweepstakes casinos)

Long Answer: Oh boy. Where to begin. Basically the way that these two sites work is you are buying yes/no contracts. An example of this could be:

Will the high temperature at Philadelphia International Airport be 75 degrees or higher today?

You would then have the option to buy either the “yes” contract or the “no” contract at a certain price. Technically speaking, there is another individual on the other side of that contract, and that’s their argument for getting away with it not technically being gambling.

With a traditional sportsbook, you are betting against the house (Ex: Fanduel or DraftKings is on the other side of your bet)

With a prediction market, another user is on the other side of your bet.

It’s still the same underlying mechanics of betting on an outcome, the only difference is who is on the opposite side of your bet.
I could go a lot more in depth on this but it’s not worth it. How prediction markets work for tax purposes is outside the scope of this tax guide, however I would expect the debate to heat up in the future over whether activity on these sites should be treated as gambling for tax purposes or whether it should be treated as capital gains/losses, similar to how you would treat stocks.

The IRS has not yet made a statement on the matter as of August 25, 2026, so it is up to you as the taxpayer to make that decision yourself and be able to justify it either way in case the IRS ever comes knocking.

Citation: https://eventmarkets.ai/prediction-market-taxes/?utm_so
urce=chatgpt.com

Short Answer: Everyone’s favorite answer, it depends!

Long Answer: Most states follow the same general rule for non-residents earning income: Is the income sourced from within that state? If the answer is yes, then you may owe taxes to that state, even if you don’t live there.

In this scenario, the key question becomes this: Is your gambling income considered New Jersey-source income?

If you placed the bet while physically located in New Jersey (such as at an NJ casino or on an online gambling platform specific to NJ while in the state), then yes, New Jersey would likely treat that as income earned within its borders. Therefore, you could be subject to NJ income tax.

That said, New Jersey does offer some relief. If your net gambling winnings for the year are $10,000 or less, you generally do not need to pay NJ state income taxes on those winnings.

But be careful — rules like this vary from state to state.
Best Practice: Always start with the question: “Am I receiving this income from a [State Name] source that I am currently located in as a non-resident?”

● If yes → Research how that specific state taxes gambling income for non-residents.

● If no → You likely don’t owe state income tax there, since the state has no taxing authority (or “nexus”) over you.

Citation: https://www.nj.gov/treasury/taxation/pdf/current/1040nri.
pdf

Taxes can be overwhelming, especially with the complicated rules around gambling. But here’s the bottom line: if you report all your income and keep detailed, verifiable records, you will be fine. If you do not report all of your income, be prepared for any consequences that may come along with that.

Treat gambling like a business:

● Keep income and expense records (gambling logs + backup docs)
● Use sessions to track accurate wins/losses
● Notify your tax professional about any gambling activity

The more organized you are, the easier it is to defend your filings if the IRS ever comes knocking.

*Please consult with your tax professional on how your gambling activity will ultimately affect your tax situation. This guide is the property of TKH Accounting Services. Give us a follow on the social media platform of your choosing where we provide tax & business advice: https://linktr.ee/tkhacc