March Madness, Betting Tax, and the Big Beautiful Bill
Posted on: March 9, 2026, 02:59h.
Last updated on: March 9, 2026, 02:59h.
- Betting about to ramp up for March Madness NCAA basketball tournament
- Estimates have projected handle for tournament at $4 billion
- Americans looking at new tax implications around betting under the Big Beautiful Bill
March Madness is upon us, an absolute sports betting behemoth, full of bracket pools, props, multi-game and multi-day action, the most bet-on sporting event in the calendar year, according to estimates.
Sports Betting Behemoth
According to H2 Gambling Capital data released this morning, sports betting handle on the NCAA men’s and women’s basketball finals will reach $4 billion this year. That makes it the most bet-on event on the U.S. sports calendar. The Super Bowl remains the most bet-on one-off game in U.S. sports – with Super Bowl LX generating an estimated $1.4 billion in handle last month, H2 said in a statement.
That would be a 6.7% increase from last year’s tournament. H2 Gambling Capital is based in the UK, frequently cited, specializing in betting and gaming market intelligence, data provision and forecasting for the gambling industry worldwide.
Tax Implications for Bettors
Interesting comment from H2 – hold rates for sportsbooks are typically lower for March Madness, since bettors aren’t as familiar with individuals players, meaning prop betting is less popular. That means sportsbook operator holds are more influenced by the performance of tournament favourites, with underdog victories and deep tournament runs boosting margins.
H2 Gambling Capital estimated that hold rates for sportsbooks for this year’s tournament will reach 7%. Last year all four No. 1 seeds reached the Final Four, only the second time ever that has happened.
Lower Hold Rates for Operators
Individual bettors will be jumping in with both feet. On the men’s side, Selection Sunday is March 15. First Four is March 17-18. First Round is March 19-20. Second Round is March 21-22. Sweet 16 is March 26-27. Elite Eight is March 28-29. Final Four is April 4, and the NCAA championship game is April 6 at Lucas Oil Stadium in Indianapolis.
On the women’s side, Selection Sunday is March 15. First Four is March 18-19. First Round is March 20-21. Second Round is March 22-23. Sweet 16 is March 27-28. Elite Eight is March 29-30. Final Four is April 3, and the NCAA championship game is April 5 at Mortgage Matchup Center in Phoenix.
Big Beautiful Bill Tax Changes for Bettors
For bettors, all winnings are taxable income, no matter how small, reported on Form 1040 in the individual income tax return (in the “other income” section). Sportsbooks issue a W-2G form for payouts of at least $2,000 and 300x the wager. Those are reported as well. That $2,000 base reporting threshold is new for 2026 (up from $1,200 for slots/bingo and $600 for other wager types, like sports betting). Sports betting is listed explicitly in W-2G instructions for the first time this year as well.
With deductions, itemize losses on Schedule A. You can only deduct gambling losses if you itemize on Schedule A (not if you take the standard deduction). With the new Big Beautiful Bill in 2026, bettors can deduct only 90% of those losses. It used to be 100% (the old 100% rules apply to the 2025 tax year, however).
Even if you break even on losses and winnings, you still pay tax. So, if you win $20,000 and lose $20,000 during the tournament, you can only deduct $18,000. The IRS looks at that $2,000 as taxable income even though the bettor broke even and made zero profit. You’d have to be a net loser to actually owe $0. This all came in effect Jan. 1 2026.
Some States Didn’t Adopt the Federal 90% Cap
Bonus bets are all taxable – whatever cash you receive counts as gambling income. A few U.S. states didn’t adopt the 90% cap. New Jersey still allows 100% betting of wins and losses under its rules. Bettors should make sure in these states the federal rule isn’t being applied on the state return.
Bottom line, every dollar of winnings is reportable whether or not you get a W-2G form. Bettors are advised to get serious when it comes to keeping track of betting activity. Keep a log – date, book, wager type, amount wagered, result, any winnings/payout. If you’re audited, your own records are what will hold up, not what the sportsbook app tracks. It’s always better to hire an accountant if your gambling activity hits over $25,000 per year.
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