Don't Mess With Taxes

In 1896, the first college basketball game was played. Now, 127 years later, the hoopla known as March Madness is big business and big betting.

The annual NCAA Division 1 college basketball tournaments, both men's and women's matches, dominate the airwaves, with networks paying millions for the broadcast rights.

Fans follow on their in-home televisions, as well as on their mobile devices via the internet.

Seeding, schmeeding: The wins aren't just important to the teams, the university cities, or the colleges' alums. Bettors have placed millions on the games, and lots of them have already lost big.

Upsets busted brackets early in the men's tourney. That happens every year. But then last night happened.

For the first time since seeding in the NCAA tournament began in 1979, there won't be a single 1-seed in the Elite Eight, or the Final Four. There also will be the fewest number of top-two seeds in the Elite Eight since seeding began.

More legal, taxable winnings: Those who bet on the pre-tournament favorites are nursing their wagering wounds. But if you're among those who like long-shots, congratulations!

The Internal Revenue Service also is happy for you. Your winnings are taxable income.

And since the 2018 Supreme Court ruling that let states legalize sports betting, more gamblers are placing their bets at legal establishments in more states.

An American Gaming Association survey conducted before March Madness tipoff found that a quarter of all American adults (68 million) planned to wager $15.5 billion on this year’s NCAA Men’s Division I Basketball Tournament.

More betting options will help them place those wagers. Since last year’s tournament, the AGA reports that Kansas, Massachusetts, and Ohio have launched retail and mobile sports betting markets, while Maryland has launched mobile wagering.

The 2023 March Madness, with 67 games over three weeks, also is the first to feature Las Vegas, the granddaddy of sports betting, as a regional host location.

I'm not a basketball fan, and my college didn't make it into the big tournaments this year, so I'm only cursorily following the games. But I do get a kick out underdogs winning, and the wailing of those who saw their supposedly better teams shocked.

I'm also fascinated by the amount of betting on the games. Let me be clear. I am not advocating betting. Neither am I judging you for putting a few dollars on your favorite team. Regular readers know I waste some bucks every time the Powerball or Mega Millions lotteries reach huge jackpots.

I do, though, recommend that you don't bet more than you're willing to lose. I also suggest that if you want to bet, do so legally.

Legal betting locales: The count of where sports betting is legal fluctuates depending on who's counting, what types of betting they're counting, and when they counted. Roughly, it's around 30 states.

Remember that each state sets its own betting rules and regulations. They also assess their own fees and taxes, in addition to the general federal income tax collected by Uncle Sam on gambling winnings.

That's why this weekend's Saturday Shout Outs go to some articles about where legal betting is possible, or soon might be.

• CBS Sports has a state-by-state (and District of Columbia) breakdown of where the country stands on sports gambling, as of January 2023. Just scroll through to find your state and what's possible there as far as betting.
• SportsHandle has a similar tally, along with an interactive map that gives you a quick overview of the status of legalized sports betting in each state and Washington, D.C.
• And since I'm a policy wonk, I had to include Legal Sports Report's legislative tracker of betting bills throughout the United States. LSR pledges to monitor sports betting bills at every step through their legislative journey from introduction through passage or failure.

Finally, if you do bet and win, I must reiterate that the payout is taxable income. You'll report it next year when you file your 2023 Form 1040.

The divided 118th Congress doesn't look like it will be making any major tax changes this year, so the filing process probably will look a lot like what's noted in this weekend's final, and shameless, shout out: my post-Super Bowl LVII item on reporting gambling winnings on IRS Schedule 1.

If you're chosen (and bet on) team is still involved in March Madness, good luck. If not, just enjoy the craziness.

You also might find these items of interest:

• 6 tax & financial tips for the next lottery millionaire
• Ways to reduce tax due on lottery & other gambling winnings
• Got more than wage income? Here's how to report it.

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