US Taxation of Gambling Winnings and Incentives to Bet

Karl Whelan

No 202222, Working Papers from School of Economics, University College Dublin

Abstract: Sports betting is growing rapidly in the US after its legalization by the Supreme Court in 2018. This paper describes the treatment of gambling winnings and losses in the federal tax code and shows how the system may incentivize some gamblers to substantially increase the scale of their betting in order to have a chance to win. This incentive stems from the fact that gambling losses can only be deducted if taxpayers are filing for itemized deductions, meaning the scale of gambling losses has to be large enough to push a taxpayer’s eligible deductions over the standard deduction. This incentive to engage in large-scale betting applies mostly to lower and middle-income households.

Keywords: Sports Betting; Gambling; Income tax (search for similar items in EconPapers)
JEL-codes: D81 H24 L83 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2022-08
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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:202222

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