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Louisiana Sports Betting Taxes
After months of speculation and planning (and a massive hurricane in the fall) Louisiana online sports betting was ready to roll on Friday, Jan. 28 at 8 a.m., led by the Louisiana Gaming Control Board.
The first retail sportsbook opened in early October 2021 at a tribal-owned casino, with commercial casinos following later in the month. Online sports betting launched on Jan. 28, 2022, with Caesars, BetMGM, DraftKings, and FanDuel. Only 55 of 64 parishes are able to wager on sports.
It is important to note that sports betting will only be allowed within the physical borders of those parishes. Geolocation technology within smartphones will verify the location of the bettor at the time of a wager before it is allowed.
As Benjamin Franklin famously said, “Nothing is certain but death and taxes'' and this is certainly true in the betting world. When Senate Bill 247 was passed and signed into law by Governor John Bel Edwards in 2021, the rules and legislation surrounding LA gambling tax were set.
Just like sportsbook operators are responsible to pay their betting tax over to the state, residents are also responsible to declare tax on their sports betting winnings. The tax regulations vary from state to state, so you need to be sure of the rules that apply specifically to Louisiana.
What are the tax rates?
Tax rates depend on your annual income and tax bracket. Gambling income is subject to state and federal taxes but not FICA taxes, and the rate will depend on your total taxable income (not just wages) minus deductions (standard or itemized).
Gambling winnings are subject to a 24% withholding for federal tax, though the actual amount you owe on your gambling win will depend on your total income. That tax is automatically withheld on winnings that reach a specific threshold.
Tax calculator assumes a standard deduction of $12,400 (single)/$24,800 (married) and does not include any municipal/local taxes.
Louisiana has a flat state income tax of 10% on betting profits from land-based locations, and 15% on all online bets, which is the rate your gambling winnings are taxed. These are broken up differently starting with your Marginal tax rate which is the bracket your income falls into. Then you have your Effective tax rate which is the actual percentage you pay after standard deductions, etc., and operate on a sliding scale depending on filing status and total taxable income. The rules state that when gambling, a person's winnings are to be combined with their annual income; which could move them into a higher tax bracket, hence why it’s important to be aware of gambling income before starting tax preparation. Casinos withhold 24% of winnings for those who provide a Social Security number. If you do not provide your Social Security number, the payer may withhold 28%.
How to pay taxes?
The first step is to understand that all gambling winnings are completely taxable and the income must be reported on your tax return. Gambling income includes but isn't limited to winnings from lotteries, raffles, horse races, and casinos. It also includes cash winnings and the fair market value of prizes, such as cars and trips. Depending on the amount of winnings, bettors may receive a W-2G form , which is sent by the payor (casino, pari-mutuel operator, sportsbook, online casino, online sportsbook, etc). The form reveals the amount of winnings and if any tax was withheld. A copy of that W-2G is sent to the Internal Revenue Service. You must report all gambling winnings as "Other Income" on Form 1040 or Form 1040-SR, including winnings that aren't reported on a W-2G. When you have gambling winnings, you may also be required to pay an estimated tax on that additional income.
If your winnings were non-cash prizes, such as an automobile or vacation trip, the IRS instructs you to report the fair market value of each prize. Non-residents with winnings at Louisiana based Online Sports Books are subject to the state tax.
Gambling winnings are considered a form of income, making them subject to taxation just like other kinds of income, particularly if they are over a certain threshold. be prepared to part with a percentage of your winnings.
Where Tax Revenue From Sports Betting Goes In Louisiana
By law, 25% of the tax revenue from mobile sports betting in Louisiana (up to $20 million) will go to early learning programs for children in the state.
Following an effort by lawmakers spearheaded by State Senator Rick Ward, those funds are targeted for helping young children enter the educational system for the first time. Tax revenue from fantasy sports wagering currently goes to the same programs.
Other revenue is earmarked for local government programs (only the 55 parishes that approved sports betting). That money is awarded proportionally based on the sports betting revenue each parish generates.
Per the Louisiana Gaming Control Board, up to $500,000 is also required to be allocated to the Louisiana Association on Compulsive Gambling.
- Behavioral Health & Wellness Fund: Monies in the fund are utilized to support and invest in intensive and comprehensive treatment facilities for individuals with compulsive and problem gambling addictions.
- Louisiana Early Childhood Education Fund: This fund serves as the funding for early childhood education and secondary education. Monies in this fund are distributed amongst schools and care facilities within the state as the State Board of Education sees fit.
- Sports Wagering Local/Purse Allocation Fun: These monies are allocated to fund purses in horse races. Two-thirds of the funds go to the Louisiana Thoroughbred Breeders Association, and one-third goes to the Louisiana Quarter Horse Breeders Association.
- Disability Affairs: The Office of Disability Affairs is designed to adequately educate, address, and resolve issues relative to the disability community.
- General State Affairs: The primary fund for financing a state’s operations.
Sports betting tax revenue will be dispersed as such:
- 60% to the general fund.
- 25% to early education.
- 12% to the parishes.
- 2% to programs for gambling addiction.
- 1% to a sports wagering purse fund for horse racing.