Wagering on your NCAA Tournament Bracket? What are the Tax Implications?
The Final Four is set for this weekend, and my beloved Tar Heels have a good shot at winning the title. In North Carolina and across the country, countless Americans have entered into NCAA office pools, and the winners will be determined Monday night. Winners take heed, however - make sure you know the applicable tax rules.
Under the Internal Revenue Code (and thus in NC also), gambling winnings must be reported as taxable income. You cannot claim an overall tax loss for gambling activities, but you can generally claim losses as an itemized deduction -- up to the amount of your winnings. (Professional gamblers report winnings on Schedule C.) Losses in excess of winnings are not deductible.
It's important to keep accurate records. Keep a diary or ledger of all your gambling activities that shows the type of gambling activity, the location, and the amounts won and lost. You can support the amounts with receipts, tickets, statements or other records that substantiate your claims.
Gambling income includes, but is not limited to winnings from lotteries, raffles, horse races, and casinos. It also covers cash winnings and the fair market value of such prizes as cars and trips.
P.S. Don't forget that in North Carolina, as in many states, most gambling activities, inlcuding office sports betting pools, are illegal. That does not mean that any winnings should not be reported, however. It's more likely that you will get penalized by the IRS for not reporting gambling winnings than you will be charged with a gambling criminal offense.
