US Taxation of Gambling Winnings and Incentives to Bet

Whelan, Karl (2023): US Taxation of Gambling Winnings and Incentives to Bet. Forthcoming in: Journal of Gambling Studies , Vol. 39,

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Taxation; risk taking
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H24 - Personal Income and Other Nonbusiness Taxes and Subsidies; L - Industrial Organization > L8 - Industry Studies: Services > L83 - Sports ; Gambling ; Restaurants ; Recreation ; Tourism

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