5 Key Tax Considerations When Gambling On Super Bowl LX
SAN JOSE, CALIFORNIA – FEBRUARY 02:The Vince Lombardi Trophy is framed by the Seattle Seahawks and New England Patriots helmets during Super Bowl LX Opening Night at San Jose McEnery Convention Center on February 02, 2026 in San Jose, California. (Photo by Chris Graythen/Getty Images)
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Super Bowl LX features a matchup between the Seattle Seahawks and the New England Patriots. While many have already seen their team be eliminated from the championship, they are looking to get involved in this year’s matchup via sports gambling. In fact, there is an estimated $1.76 billion expected to be legally wagered on this year’s matchup, according to ESPN. What many bettors may not realize is that winning their wagers can have some significant tax consequences. This article highlights the five key tax considerations bettors need to be aware of when betting on this year’s Super Bowl.
(1) Gambling Winnings Are Taxable
As outlined in a Forbes contributor article, Section 61 of the Internal Revenue Code states, “except as otherwise provided in this subtitle, gross income means all income from whatever source derived.” While many people think about this as their wages and salaries, this definition applies to any income received by a taxpayer, ranging from tips and overtime income all the way to gambling income.
For instance, consider a taxpayer who wagers $110 on the Seahawks to cover the spread (currently a 4.5-point favorite) to win $100. If the Seahawks do, in fact, win by more than 4.5 points, the bettor will win $100, and the bettor will pay taxes on that $100 of winnings. At the federal level, this tax liability will range from $10 to $37 based on the taxpayer’s marginal tax rate.
(2) Gambling Losses Are Often Not Deductible
As a general rule, gamblers can deduct their gambling losses to the extent of their gambling winnings. A key tax issue with sports gambling activities is that the losses are only deductible as an itemized deduction. As of 2022, only about 10% of taxpayers itemize their taxes, according to the Tax Policy Center. This means that about 9 out of 10 taxpayers do not have any deductions available to them from their gambling losses.
To illustrate the impact, consider the prior example where the taxpayer won $100 from the Seahawks covering the spread. However, the taxpayer also bet $110 on the game being over 45.5 total points and lost. The taxpayer’s net position would be a $10 loss. However, from a tax perspective, the taxpayer won $100, increasing their gross income by that amount, and has no above-the-line deduction. Instead, the taxpayer must itemize their deductions, meaning that they have more than $16,100 ($32,200 if married) in itemized deductions throughout 2026, to be able to deduct their gambling losses.
Even though it is possible for those gambling on the Super Bowl to net their losses against their gains, the vast majority of taxpayers are in a situation where they will pay taxes on their winning bets without being able to deduct the losses of their losing bets. In fact, starting in 2026, this disadvantage will become even stronger. As part of the One Big Beautiful Bill Act of 2025, gambling losses are now limited to 90% of the loss, meaning that even if a taxpayer itemizes and breaks even, they will still owe taxes, according to a Forbes contributor article.
(3) Gambling Activities Typically Do Not Lead To Receiving A Tax Form, But Bettors Must Still Report Those Activities
Although the gambling tax requirements can be punitive, the reporting requirements are somewhat unstructured. Certain taxpayers with gambling activities will receive a Form W-2G, outlining their winnings and losses. For those engaged in sports betting, they will only receive this W-2G if their winnings are more than 300 times the amount of the wager (and more than $2,000). To put this into context, a 9-leg parlay pays out 360 to 1, meaning that the gambler would need to win a very improbable bet for them to receive a W-2G.
Because the majority of those betting on the Super Bowl will not be receiving a tax form summarizing their activities, compliance will come down to voluntary reporting of the activities. That is, taxpayers must carefully track their gambling activities on the Super Bowl and throughout the year and report them on their 2026 income tax return.
(4) State Tax Liabilities May Also Arise From Gambling Activities
Gamblers must also be aware of the possible state income tax liabilities that can result from gambling. Nine states do not tax income (Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming). However, among the states that do tax income in 2026, taxpayers can be on the hook for taxes on their gambling activities, ranging from as low as 2.5% in Arizona to as high as 13.3% in California.
Complicating things is that not all states conform to the Federal definition of income, meaning that this income could be characterized differently in the eyes of the state that the taxpayer lives in. Furthermore, some states, like North Carolina, do not have gambling losses as an itemized deduction. Thus, for North Carolinians, even if they itemize their taxes at the Federal level, at the state level, sports gambling losses cannot be deducted against their winnings, resulting in a 3.99% income tax on their gross winning wagers in 2026.
(5) Prediction Markets Provide A Tax-Advantaged Option For Gambling On The Super Bowl
As discussed in a Forbes contributor article, prediction markets are not currently considered sports gambling in the same way as wagers placed within a registered sports betting provider, and they provide taxpayers with a unique tax-advantaged way to gamble on sports. Companies like Kalshi and Underdog are governed by the CFTC (rather than individual state gambling authorities) and offer predictions on anything that might happen in the future, including the outcome of sporting events.
While there are conflicting opinions on whether or not these predictions constitute a Section 1256 contract, at a minimum, the prediction market wagers provide a clear and tangible benefit to taxpayers in the form of netting. That is, currently, many taxpayers report prediction market gains as ‘other income,’ allowing for netting of gains and losses. Consequently, taxpayers can net their losses from their prediction market wagers against their wins and report the combined amount.
This benefit carries over to taxpayers whether or not they are itemizing their taxes. For those itemizing their deductions, they do not have to increase their gross income by as much, providing more favorable cutoffs for qualifying for certain credits and itemized deductions. For those not itemizing their deductions, they can now deduct the full amount of their sports wagering losses.
The key catch with taxpayers using prediction markets for gambling is that the reporting requirements are no longer based on the Form W-2G. Instead, taxpayers will receive a tax form based on the requirements from Form 1099-MISC (potentially even Form 1099-B, which would provide even more detail of their transactions). Thus, the risk of underreporting taxable income will be substantially higher among those taxpayers who rely on prediction markets for their sports betting.
