Every dollar you win at a sportsbook is taxable income. That includes winnings from bonus bets. The IRS does not care whether the bet was funded with your own money or a promotional credit. If you cleared a profit, you owe tax on it. Here is what the rules actually mean for your bankroll.
When does a sportsbook send you a W-2G?
A sportsbook is required to issue a W-2G form when two conditions are both met: your winnings exceed $600 and the payout is at least 300x your wager. Hit a $2 parlay that pays $700? That likely triggers a W-2G. Miss either threshold and the book may not send the form — but you still owe the tax. All gambling winnings must be reported as ordinary income on your federal return regardless of whether a W-2G is issued. Verify current thresholds against IRS Publication 525 at irs.gov before filing.
What is the federal withholding rate?
Federal income tax withholding of 24% applies to sports betting winnings over $5,000 in most scenarios. The sportsbook withholds that amount before it ever hits your account. If your marginal tax rate is higher than 24%, you will owe more at filing. If it is lower, you may get some back. Either way, plan for the tax bill before you spend the money.
Do state taxes apply to sportsbook winnings?
Yes, in most states. State income taxes on gambling winnings vary widely. Nevada, for example, imposes no state income tax on winnings at all. Other states tax gambling income at the same rate as ordinary income, and a few have flat gambling-specific rates. Availability and rates depend entirely on where you live, not where the sportsbook is licensed. Check your state revenue authority's website for current rules. If you are shopping bonuses across multiple books, see Best Sportsbook Welcome Bonuses Ranked for 2026 to understand what each offer actually pays before taxes enter the picture.
How do the major offers compare on potential tax exposure?
Bigger bonuses can mean bigger taxable events. The table below compares three common offer types on the attributes that matter most for tax planning. Note that bonus-bet winnings are ordinary income just like cash winnings — the stake is not returned on a win, but the net profit is fully taxable.
| Offer Type | Example / Cap | Taxable If You Win? | W-2G Likely? | Notes |
|---|---|---|---|---|
| Second-chance / bet insurance | BetMGM up to $1,500 back in bonus bets | Yes — net winnings from bonus bets are ordinary income | Possible if payout exceeds $600 at 300x+ odds | Stake not returned on win; only net profit is credited and taxable |
| Bet & Get (guaranteed bonus bets) | Varies by book; triggered regardless of outcome | Yes — any winnings from the bonus bet are taxable income | Possible depending on odds and payout amount | Simplest format; bonus credited win or lose on qualifying bet |
| Deposit match | Commonly 100% match up to a set dollar cap | Yes — profits from matched funds are ordinary income | Possible on large winning wagers; 300x threshold applies | Rollover of 5x–25x required before funds are withdrawable |
For a deep dive on whether BetMGM's headline number holds up after terms and taxes, read BetMGM First Bet Offer: Is the $1,500 Back Real Value?. For FanDuel's structure, see FanDuel Sportsbook Offer: What You Actually Get.
Can you deduct gambling losses?
Federal tax law allows you to deduct gambling losses, but only up to the amount of your gambling winnings, and only if you itemize deductions. You cannot net losses against winnings and report only the difference as income — you report gross winnings as income, then list losses separately as an itemized deduction. Keep detailed records: date, amount wagered, amount won or lost, and the sportsbook. Your account transaction history is a good starting point.
Does the promo code you use affect your taxes?
No. The IRS does not distinguish between a cash bet and a bonus-bet wager when it comes to taxable winnings. What matters is the profit you realize. That said, understanding how promo codes unlock offers in the first place is worth your time — see Sportsbook Promo Codes: How They Work and Why They Matter for the mechanics.
Sports betting is legal in 39 states plus D.C. and Puerto Rico as of September 2026. Tax treatment of winnings varies by state; always verify your obligations with your state's revenue authority and a qualified tax professional. 21+ only in most states. Gambling problem? Call 1-800-GAMBLER.