Questions about Taxes and Withdrawals

hydrokube

Hello! I have a couple of additional questions.

Having placed all bets for DraftKings, I'm waiting for my bets to play out to withdraw the money. There are various stipulations in some of these withdrawal rules about playthrough requirements or in DraftKings it says "Withdrawals may be canceled due to limited gameplay.". Will I have any trouble withdrawing my winnings?
I'm a little confused on taxes. I've been spending the morning reading about the tax implications of gambling. It sounds like we have to pay for winnings that include the initial wager too. As an example, I just spent 200 in bonus cash on one bet, then 600 of my own money on another with total profit of 147 when the bet concludes. If the 600 wins (and it's most likely to win), then I'm on the hook for the 600 + winnings in terms of taxes. This eats up all of my profit between federal and Michigan taxes. Additionally, I'd have to itemize my taxes to offset gambling losses (currently the standard deduction always works better for us). How do people make this work and actually make money on it when we're essentially double-taxed on gambling in the US? Can someone clarify this? Am I missing something or is this just a bad deal?

On another note, do these gambling sites send an annual report of winnings and losses for tax purposes?

carlos

@hydrokube 1. As long as you bet the money deposited and the freebets given, you should have no issues with withdrawing your money.
2. You should follow your state tax guidelines, maybe you could find more info about this on specific sites for this.

hydrokube

Thanks, I'm less concerned with state taxes and more concerned with federal taxes. Everything I'm seeing online says that your initial wager is taxed as part of winnings. As an example, you spend $100 real money on back bet 2 and it wins let's say $10. You now owe taxes on $110. My tax bracket is 22%, so now I owe $24.20 in taxes. This would put me net negative instead of making a profit (I won $10 and owed the US government $24.20). Given that The Dutcher seems to put all free bets on the "underdog" and all real money on the likely winner, your tax burden could be quite high.

It seems to me that federal income taxes will consume a majority of any profit (if not all of it). I'm hoping that I'm missing something here, so let me know if that's the case. Otherwise, I can't continue based on my research.

Claudio NinjaBet

Hi @hydrokube ! You are taxed only on your net winnings if they are more than 600$. The bookmakers will send you a 1099. But you are only taxed on your net profit ;)
You can read here for example https://turbotax.intuit.com/tax-tips/general/tax-considerations-for-fantasy-sports-fans/L75xYecdS

hydrokube

Gotcha, thanks! I was super confused because this article basically says that you can't subtract the wager cost from the winnings:
https://turbotax.intuit.com/tax-tips/jobs-and-career/how-to-pay-taxes-on-gambling-winnings-and-losses/L7JNH7mjn

It sounds like these sports betting sites may be handled differently than traditional gambling?

Claudio NinjaBet

Bookmakers will know how much you made net on their site. Don’t worry. Your taxes are due on the net profit.