Online Betting and Your Taxes

As fall sports kick into gear, you may be tempted to try your hand at sports betting. But Texans, in particular, should keep the following points in mind.

August 12, 2025

Online Betting and Your Taxes

Gambling is Widely Illegal in Texas

It’s hard to believe because it seems so pervasive, but aside from the state lottery and certain types of animal racing and bingo, gambling is widely illegal in Texas. This includes sports betting. The state legislature has considered several bills over recent years, including in 2025, that would legalize certain forms of gambling (sports betting in particular), but nothing has passed.

There are several reasons for this, but one of the most obvious has to do with the fact that Texas does not collect a state income tax. As the Tax Foundation points out, tax revenue is the carrot many state policymakers need to support legalized sports betting. Other states collected more than $1.8 billion in tax revenue from sports betting taxes in fiscal year 2023. Without a state income tax, that monetary incentive is missing.

Online Gambling

Some popular online gambling sites like DraftKings have found ways around Texas laws with fantasy sports, social sportsbooks, and other “skill-based” games, which are believed to be within the guidelines. Many winnings over $600 and at least 300 times the amount wagered are reported on a federal Form W-2G, and if you win big, $5,000 or more, 24% is withheld for the IRS.

You Can Gamble and Bet Out of State

And then, of course, you can gamble and bet out of state in jurisdictions that allow it. Just like traveling to Las Vegas, Oklahoma, or another place with casinos to gamble in person, Texans can engage in sports betting, even online, if they are physically in a jurisdiction that allows it. This isn’t based on the honor system. That little device in your pocket sends out a geolocation signal that is used to determine whether you’re A-OK to bet.

Do keep in mind that some states tax nonresidents on their gambling winnings. The laws are constantly changing, so we won’t point them out here, but a good rule-of-thumb: Understand the tax laws of a state before you gamble or bet there. Yes, even while betting online.

And, finally, a potential change for 2026: The most recent federal tax bill, as it reads currently, newly restricts gambling losses to 90% against winnings. Those who regularly or professionally gamble will want to take a good look at the change and how it may affect them.

Photo purchased through Adobe Stock

August 12, 2025

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Let’s take a look at your finances together. We offer a complimentary 1-hour call to review your past tax returns. If we see a way to help you, we will.

Gambling is Widely Illegal in Texas

Online Gambling

You Can Gamble and Bet Out of State

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