Nj Sports Gambling Tax
Sports gambling winnings are subject to income tax and you must report them on your tax return, even if you don’t receive tax documentation for the gambling income. Gambling agencies aren’t required to report your winnings unless you win at least 300 times what you bet and that amount is over $600 (or otherwise subject to federal income tax. Additionally, in December 2018, a 1.25% sports betting tax increase came into effect. This brings the sports betting taxes to 9.75% for sports betting facilities and 13% for mobile and online institutions. These additional gambling taxes go to helping the Casino Reinvestment Development Agency.
Sports betting first became legal in New Jersey in June, 2018. Since then, there is no denying that it has become a big cash cow not only for Atlantic City casinos and their NJ online gambling partners but also for the State of New Jersey. Sports betting in AC is moving quickly and everyone wants a piece of the pie.
Sports Betting in AC
According to a November 12 article on www.pressofatlanticcity.com, over the course of not quite a year and a half, NJ sportsbooks have taken in over $3 billion in legal wagers, generating $284.6 million in gaming revenue and over $36 million in taxes.
Some government officials feel that it is not right that Atlantic City itself does not directly reap the financial benefits and that needs to change.
How is Atlantic City benefiting from the substantial tax revenue from NJ sports betting? Or is it?
At a recent meeting of the Atlantic City Taxpayer’s Association, Atlantic City Mayor Marty Small made the following comment:
“In 14 months, New Jersey has overtaken Las Vegas as the No. 1 sports betting destination, and a lot of it has to with the success of Atlantic City and online. But we don’t get one penny. … That’s unacceptable.”
Small said that Atlantic City could use the additional money for property tax relief.
The mayor does not consider it fair that a municipality that is home to nine casinos receives no direct tax revenue at all generated by sports betting. Meanwhile, municipalities where there is a racetrack but no casinos do.
East Rutherford in Bergen County is home to the Meadowlands, and Oceanport in Monmouth County is home to Monmouth Park. Both facilities offer online sports betting in addition to horse racing. Atlantic City has a racetrack, too, but it closed in January, 2015.
The existing state law relating to taxes on gross sports betting revenue
In October, 2018, Gov. Murphy signed a bill into law whereby revenue generated from sports betting or a “joint sports wagering operation” would incur an additional 1.25 percent tax. The Casino Reinvestment Development Authority (CRDA) would receive this money for the purpose of Atlantic City “marketing and promotion.”
However, according to the state Division of Gaming Enforcement, that has not been happening in practice. Instead, the CRDA has been giving large amounts of this money to the Meadowlands and Monmouth Park municipalities and counties rather than letting it stay in Atlantic City. Sports betting in AC was just the beginning.
Mayor Small said that he and other Atlantic City officials are “ecstatic” about the “excitement and energy” that sports betting has brought to the city. However, they would like Atlantic City to reap more of the financial rewards.
Assemblyman John Armato said that “money generated in Atlantic City needs to stay in Atlantic City.” Armato and fellow Assemblyman Vince Mazzeo both indicated a willingness to explore other options on how the tax revenue from sports betting should be allocated.
Difference between New Jersey and other states how sports betting tax revenue is distributed
The manner in which sports betting tax revenue gets distributed in New Jersey is notability different than in other nearby states. Rather than an agency such as the CRDA controlling the distribution, in Pennsylvania, a portion of the 35 percent tax rate goes directly to host municipalities and their respective counties. In New York, a portion of the 10 percent tax rate likewise goes directly to host municipalities and their respective counties.
Could a lack of trust by New Jersey in Atlantic City be a factor?
Michael Pollock, managing director of Spectrum Gaming Group, voiced his opinion on the matter. Pollack suggested that New Jersey’s apparent reluctance to give any of the tax revenue from sports betting to Atlantic City directly makes sense based on “the history between the state and the city.” Pollock further stated that “there has never been a great deal of confidence in the municipal government of Atlantic City to effectively manage its finances.”
Dustin Gouker, lead sports betting analyst for PlayNJ.com, who doesn’t live in New Jersey, presumably feels that the state doesn’t trust Atlantic City. He had this to say:
“I am not aware of another state that handles a jurisdiction with kid gloves. I would be frustrated if I was someone who lived or worked in Atlantic City.”
On the other hand, one of the NJ sports betting tax bill’s primary sponsors, Assemblyman John Burzichelli, denied that the legislation reflected how capable the state thinks Atlantic City is of managing its finances. Unlike the sports betting municipalities in the other nearby states, Atlantic City has a redevelopment authority. Therefore, “the tax is getting to Atlantic City. It’s just going through the Casino Reinvestment Development Authority.”
Lottery and Gambling Winnings
Winning the Lottery or scoring on a sports wager can change your life in profound ways. Congratulations on your lucky break!
Just remember that your good fortune includes a responsibility to pay taxes and fees on those winnings.
Gambling Winnings:
In 2018, Governor Phil Murphy signed a law that authorized legal sports betting in New Jersey. The law (A4111) allows people, age 21 and over, to place sports bets over the internet or in person at New Jersey's casinos, racetracks, and former racetracks. Sports betting is now among the many forms of gambling winnings that are subject to the New Jersey Gross Income Tax, including legalized gambling (sports betting, casino, racetrack, etc.) and illegal gambling.
Lottery:
New Jersey Lottery winnings from prize amounts exceeding $10,000 became subject to the Gross Income Tax in January 2009.
New Jersey Income Tax is withheld at an amount equal to three percent (3%) of the payout for both New Jersey residents and nonresidents (N.J.S.A. 54A:5.1(g)).
Withholding Rate from Lottery Winnings
The rate is determined by the amount of the payout. If a prize is taxable (i.e., over $10,000), the entire amount of the payout is subject to withholding, not just the amount in excess of $10,000. The withholding rates for gambling winnings paid by the New Jersey Lottery are as follows:
- 5% for Lottery payouts between $10,001 and $500,000;
- 8% for Lottery payouts over $500,000; and
- 8% for Lottery payouts over $10,000, if the claimant does not provide a valid Taxpayer Identification Number.
Companies that obtain the right to Lottery payments from the winner and receive Lottery payments are also subject to New Jersey withholdings. Each company is required to file for a refund of the tax withheld, if applicable.
LotteryNew Jersey Lottery winnings from prize amounts exceeding $10,000 are taxable. The individual prize amount is the determining factor of taxability, not the total amount of Lottery winnings during the year.
- For example, if a person won the New Jersey Lottery twice in the same year, and the winning prize amounts were $5,000 and $6,000, these winnings would not be subject to New Jersey Gross Income Tax. However, if that person won the Lottery once and received a prize of $11,000, the winnings would be taxable.
- This standard for taxability applies to both residents and nonresidents.
- The New Jersey Lottery permits donating, splitting, and assigning Lottery proceeds to someone else or to a charity. If you choose to donate, split, or assign your Lottery winnings, in whole or in part, the value is taxable to the recipient in the same way as it is for federal income tax purposes.
Making Estimated Payments
If you will not have enough withholdings to cover your New Jersey Income Tax liability, you must make estimated payments to avoid interest and penalties. For more information on estimated payments, see GIT-8, Estimating Income Taxes.
Out-of-State Sales:
Out-of-state lottery winnings are taxable for New Jersey Gross Income Tax purposes regardless of the amount.
Nj Sports Gambling Tax Penalties
Gambling winnings from a New Jersey location are taxable to nonresidents. Gambling includes the activities of sports betting and placing bets at casinos and racetracks.
Calculating Taxable Income
You may use your gambling losses to offset gambling winnings from the same year as long as they do not exceed your total winnings. If your losses were greater than your winnings, you cannot report the negative figure on your New Jersey tax return. You must claim zero income for net gambling winnings. For more information, see TB-20(R), Gambling Winnings or Losses.
You may be required to substantiate gambling losses used to offset winnings reported on your New Jersey tax return. Evidence of losses can include your losing tickets, a daily log or journal of wins and losses, canceled checks, notes, etc. You are not required to provide a detailed rider of gambling winnings and losses with your New Jersey tax return. However, if you report gambling winnings (net of losses) on your New Jersey return, you must attach a supporting statement indicating your total winnings and losses.
Nj Sports Gambling Tax Advice
Reporting Taxable Winnings
Include taxable New Jersey Lottery and gambling winnings in the category of “net gambling winnings” on your New Jersey Gross Income Tax return.