New York Gambling Expansion & Tax Concerns

The New York online sports betting market launched in January 2021 and quickly became the largest revenue-generating state in the country. New York is now beginning to show interest in expanding its gambling offerings in the near future. Legislation has been proposed to increase the number of online sports betting operators and invite discussion for the legalization of iGaming and online poker.

While the immediate outcome of the legislation is yet to be determined, it is clear that New York is interested in increasing its gambling footprint. How will this affect New York residents? Many taxpayers will not be impacted, but high-income earners will quickly see that New York isn’t a tax-friendly state for gamblers.

On the state level, residents can deduct gambling losses (to their extent of their winnings) as an itemized deduction. However, once your state Adjusted Gross Income (AGI) reaches certain thresholds (see below), itemized deductions begin to phase out.

Once your AGI reaches $1 million, gambling losses are disallowed completely. At this income level, residents are taxed on their gross gambling winnings. New York has one of the highest state tax rates (ranging from 4%-11%), so this can add up quickly for high-income earners.

• Itemized deductions are reduced by 25% if New York AGI exceeds:

• $100,000 for single or married filing separately taxpayers

• $200,000 for married filing jointly taxpayers

• Itemized deductions are reduced by 50% if New York AGI exceeds:

• $525,000 for all taxpayers

• Itemized deductions disallowed (except for 50% charitable contributions) if New York AGI exceeds:

• $1 million for all taxpayers

It is important to make yourself aware of federal and state tax regulations before you gamble. This will give you a better idea of how it will impact your particular tax situation.

And, as always, track your gambling activity, using a logbook, per the session method. This not only gives you an accurate record of your results, but could result in a reduced AGI and save you considerable tax.