Is the original wager included in sports gambling winnings for income tax purposes?

Question

The IRS states that all gambling winnings are fully taxable, regardless of whether they are reported to you by the gaming operator on a W-2G form. However, in the case of sports betting, the cases where the operator must provide you a W-2G are pretty rare. Thus, accurately reporting gambling income and/or losses on income tax returns hinges on keeping good records and crunching the numbers accordingly.

If I place a $100 bet with an online sportsbook at +100 odds and subsequently win the bet, I am returned $200 (my original $100 plus $100 of profit).

Are the reportable winnings in this case $100 or $200? My intuition would say that my winnings are equal to the net profit that I received back (thus, $100), but the IRS language that I have found seems ambiguous.

Answer 1

You cannot deduct the wager from the winnings. If you paid $100 to win $200 - your taxable income is $200.

You can deduct gambling losses, up to the amount of winnings, as misc. deduction on Schedule A, so if you put a wager of $100 and lost, and then put a wager of $50 and won $80 - you can deduct $80 (out of your total $100 lost) of the lost bet from the winnings.

Here's the Intuit's (TurboTax) article, and the authority is from the IRC Sec. 61 and IRC Sec. 165(d).

While income from gambling is covered under the Sec. 61 which defines any income as taxable income unless excluded, deductions need to be explicitly allowed and the only deduction allowed with regards to gambling is listed in the IRC Sec. 165.