Breaking Down the Sports Betting Tax Landscape
Legislators Consider Abolishing Federal Excise Tax for Sports Betting Operations
By: Mike 'The Gambler' Savio02/20/2025 The Rise and Fall of Sports Betting Taxes ||| Photo by Martin Falbisoner, CC BY-SA 3.0
Key Insights
- The sports betting tax landscape has evolved significantly, pushing towards higher state-level taxes to fund public initiatives.
- Regulatory discrepancies across states, federal implications, and the potential for audits persist.
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Dive into the Past
Since the 2018 PASPA repeal, the U.S. sports betting handle has skyrocketed, breaking the $500 billion mark[3]. In the following years, states have been quick to legalize and tax the activity, with early adopters implementing high initial rates and others opting for more competitive alternatives to attract operators.
Present-Day Trends
- Rising Tax Rates:
- Louisiana is looking to double its tax rate from 15% to 32.5%, generating millions more for education and NCAA programs[4].
- North Carolina has proposed a 36% rate, following Pennsylvania's lead[3].
- Massachusetts and Maryland are considering jumps to 51% and 30%, respectively[3].
- Federal Impact:
- Potential excise tax reductions could arise if activity shifts to peer-to-peer "event markets" like betting exchanges[2].
- Loss deductions remain limited to itemizers, with full reporting of gross winnings mandatory[5][2].
- State vs. Federal Oversight:
- State taxes fund programs, such as Louisiana's SPORT Fund (25% designated for NCAA athletes)[4].
- Federal excise taxes (0.25% handle rate) may become less relevant due to market shifts[2].
Takeaways to Remember
- High tax rates can be found in New York, New Hampshire, and Rhode Island at 51%[3].
- Discrepancies among tax hikes, such as Louisiana's 32.5%, are intended to align with other gaming products and bolster public initiatives[4].
- Inaccurate reporting of winnings or improperly deducting losses can lead to IRS scrutiny[5].
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- Mike 'The Gambler' Savio, an industry expert, shares detailed insights about the U.S. sports betting tax landscape and the online casino industry on casinos.com.
- The sports betting handle in the U.S has surged since the 2018 PASPA repeal, surpassing $500 billion.
- States are implementing varying tax rates on sports betting activities, with Louisiana considering a doubling of their current tax rate to 32.5%.
- There are proposals for higher tax rates in Massachusetts (51%) and Maryland (30%), aiming to generate more funds for state initiatives.
- The potential federal impact includes possible excise tax reductions if activity shifts to peer-to-peer "event markets."
- State taxes, such as Louisiana's SPORT Fund, fund programs like NCAA athlete support, while federal excise taxes may become less relevant due to market shifts.
