Earnings from sports betting are considered personal income in the United States, and are therefore taxable. Taxes have been deducted from gambling proceeds in the country for years, and when the federal ban on sports betting was overturned by the Supreme Court, sports betting profits also became taxable across the country. In the United States sports betting industry, earnings are taxed by both the federal and state government.
The federal government, through the Internal Revenue Service (IRS), charges sports bettors a flat rate of 24% tax on winnings over $600 or amount that is 300 times the original stake. However, There are some factors that could determine if the tax rate gets bigger. Taxes paid by bettors on winnings at the state level differ from one state to the other. Bettors could pay an additional hefty tax or pay nothing at all depending on where they made the bet.
In this article, we take a look at American states where sports betting is legal and how much they charge as tax. It is to be noted that the taxes for each state excludes the federal tax rate which are withheld from sports betting profits.
Arizona: Sports betting kick-started in the state of Arizona in September 2021 after it had earlier been legalized in April of the same year. The state currently has 18 online sportsbooks. Arizona charges bettors between 2.59 - 4.5% in taxes, depending on the amount of winnings.
Arkansas: Sport betting expanded to the online space in Arkansas in March 2022 after it became legal in the state in November 2018. Retail betting had existed earlier in the state after legalization. The state of Arkansas charges bettors a 3% tax on all income made from gambling.
Colorado: Colorado is a big market for sports betting in the United States. Online and retail sports betting has been available in the state since May 2020 after Colorado voters had given the approval by a slim margin. The state levies a 4.63% tax on profits made from sports betting.
Connecticut: The state of Connecticut launched sports betting in the retail and online space in September and October 2021, respectively. There are three online sportsbooks operating in the state. Incomes made from sports betting in Connecticut are subject to a tax rate of 6.99%.
District of Columbia: After series of discussion at the federal level in early in the year, the US Congress approved sports betting in the District of Columbia in May 2019. DC is in a unique situation due to its political structure. The district charges an 8.5 tax on sports betting winnings.
Illinois: Sports betting was legalized in Illinois in June 2019 after the bill was passed in the state's legislature. Retail and online betting went live in the state in March and June 2020, respectively. Profits made on sports betting are subject to a tax rate of 15% in the state of Illinois.
Indiana: Indiana launched sports betting in the retail space in September 2019, and expanded to the online space a month after. The state currently has 14 sportsbooks maintaining operations within its borders. Indiana applies a 3.23% tax on all incomes made from sports betting.
Iowa: Legalization of sports betting in Iowa was completed in May 2019, and sportsbook operators began operations in the state in August. A total of 18 sportsbooks maintain operations in the state currently. Iowan bettors are taxed 5% on profits made from sports betting.
Kansas: Kansas opened doors to online sports betting in September 2022. The state had earlier legalized it in May 2022 and the law became effective in July. Both online and retail sportsbooks are allowed within Kansas. The state levies a 5% tax on sports betting proceeds.
Louisiana: Sports betting debuted in the state of Louisiana in January 2022. It had earlier been declared legal in the state in June 2021. Sports betting in the online and retail space is currently allowed in 55 of the state's 64 parishes. Bettors are taxed 5% of their winnings in Louisiana.
Michigan: Michigan legalized sports betting in December 2019. The retail sportsbooks started operation in 2020 but sports betting in the online space wasn’t launched until January 2021. There are 14 sportsbook apps in operation in the state. Michigan charges 4.25% tax on sports betting profits.
Maryland: Sports betting got the green light in Maryland in April 2021 after the bill was passed in the state Legislature. Retail sportsbooks opened in December 2021 while sports betting in the online space begun in November 2022. Winnings on betting are taxed 8.75% in the state.
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Nevada: Sports betting has been around in Nevada for decades. It was the only state in the country not affected by the federal ban. Nevada is a leading state in the American sports betting industry with a big market in retail and online. The state charges zero tax on betting profits.
New Hampshire: Sports betting was legalized in New Hampshire in 2019. The state currently has three retail sportsbooks. DraftKings maintains a monopoly in the online space after sealing a deal with the state's regulator in November 2019. The state has zero tax on betting proceeds.
New Jersey: New Jersey legalized sports betting in 2012 after standing up to the federal ban. However, major sports leagues in America filed a series of lawsuits against the state, until the federal ban was overturned in 2018. The state charges bettors 3% tax on their winnings.
New York: New York had legalized retail sports betting in 2019, but online sportsbooks didn't launch in the state until January 2022. The state has become the country's biggest sports betting state by monthly handle. New York charges punters an 8.82% tax on betting profits.
Ohio: Sports betting in the retail and online space only kick-started in Ohio in January 2023. The sports betting bill was passed by both chambers of the Ohio Legislature and signed into law by Governor DeWine in December 2021. The state takes 4% tax on winnings in sports betting.
Oregon: Oregon legalized sports betting in August 2019. Only tribal casinos can offer retail sports betting in the state. In the online space, an SBTech powered Scoreboard app offered by the regulator is the only option. The state withholds 8% of winnings as tax.
Pennsylvania: Pennsylvania is one the states that legalized sports betting before the federal ban was upended. The sports betting bill was signed into law in Pennsylvania by Governor Tom Wolf in October 2017, and became active in 2018. The state levies a 3.07% tax on winnings.
Rhode Island: Rhode Island was one of the first states to legalize sports betting in the country after the overturn of the federal ban. The state has two retail sportsbook locations and one option in the online space. There's a 5.99% tax on all winnings made from betting in the state.
Tennessee: Sports betting is only available in the online space in Tennessee, and that might not be changing soon. It is currently one of the two legal sports betting states without a retail location. Tennessee does not withhold any tax on profits made by bettors..
Virginia: Sports betting went live in the Commonwealth of Virginia in January 2021 on the online space. The state expanded to retail sports betting in July 2022 when Hard Rock sportsbook opened a location in Bristol. Proceeds tax rate in the state ranges from 2% - 5.75%.
West Virginia: Sport betting was already legal in the state of West Virginia before the federal ban was upended. The state was one of the first to accept online sports betting in the country. West Virginia withholds no tax on betting proceeds, but charges users with no ID 6.5%.
Wyoming: Sports betting launched in Wyoming in September 2021. Wyoming is one of the two legal sports betting states without a retail location. There are currently four sportsbooks operating in the state. Wyoming does not charge bettors any tax on sports betting income.
