Sportsbook bonuses look like free money until April. They're not. The IRS treats cash bonuses as income, your state tax authority may agree, and a 2026 rule change is quietly making the math worse for most bettors. Here's exactly what you owe and why.
Do sportsbook welcome bonuses count as taxable income?
Yes — full stop. DraftKings spells out the formula directly: Net Earnings = (Cash Winnings – Cash Entry Fees) + Cash Bonuses. When that number clears $600 in a calendar year, the operator files a Form 1099-MISC with the IRS and sends you a copy. You don't get to pretend the bonus didn't happen. Before you chase any of the offers on our Best Sportsbook Welcome Bonuses Ranked for New US Bettors page, understand the tax cost is baked into the deal.
When does a W-2G get triggered?
A W-2G is a different animal from a 1099-MISC. The sportsbook issues one when you win $600 or more and the payout is at least 300 times your wager amount. Hit a long-shot parlay at the right price and that form shows up whether you want it or not. The book may also withhold 24% of that payout on the spot for federal taxes. Keep your bet slips — the IRS expects bettors to maintain an accurate diary of all winnings and losses.
Can you deduct gambling losses against your bonus winnings?
Only if you itemize on Schedule A. Bettors who take the standard deduction — which is most Americans — cannot deduct gambling losses at all. They pay income tax on gross winnings with zero offset. For itemizers, losses were deductible up to the amount of winnings; starting tax year 2026, that cap tightens further: you'll only be able to deduct 90% of gambling losses, not 100%. That 10% floor is real money if your volume is high. For a full breakdown of how wagering requirements interact with taxable events, see the Sportsbook Bonus FAQ: Wagering Requirements, Expiry & Taxes.
Does your state take a cut too?
It depends where you live. Florida and Nevada levy no individual state income tax on gambling winnings — bettors there owe only federal. Most other states with legal sports betting treat gambling income the same as wages. Iowa, for example, adds 3.8% state tax on top of your federal bracket rate. Legality and tax treatment vary by state; confirm your state's rules before claiming any bonus. 21+. Gambling problem? Call 1-800-GAMBLER.
How do the major books compare on bonus structures that affect taxes?
| Sportsbook | Welcome Offer Type | Max Bonus Amount | 1099-MISC Risk | Rollover on Bonus Bets |
|---|---|---|---|---|
| BetMGM | First-bet safety net (bonus bets if first bet loses) | Up to $1,500 | High if cash bonuses trigger $600+ net earnings | Generally none on returned bonus bets |
| FanDuel | Bet $5, get $300 bonus bets (if bet wins) or first-bet refund up to $200 | Up to $300 | Moderate; bonus bets produce taxable cash winnings, not taxable stake | Generally none on returned bonus bets |
| DraftKings | Bet $5, get $200 in bonus bets instantly | Up to $200 | Uses explicit Net Earnings formula; $600+ triggers 1099-MISC | Generally none on returned bonus bets |
Bonus bet stakes are non-withdrawable — only the net winnings from a winning bonus bet are paid in cash. That means the taxable event is the cash winnings produced, not the face value of the bonus bet itself. Still, those winnings pile into DraftKings' Net Earnings formula. For a deep dive on BetMGM's specific offer structure, read the BetMGM Sportsbook Bonus: $1,500 First-Bet Offer Explained. For FanDuel's mechanics, see the FanDuel Sportsbook Welcome Bonus: Full Review & Claim Guide.
What records should you keep?
The IRS wants a contemporaneous diary: date, location, type of wager, amounts won and lost. Screenshot your bet history monthly. Save every W-2G and 1099-MISC you receive. If you're itemizing losses, you need documentation to match every dollar of deduction. The 2026 loss-deduction change makes clean records more valuable, not less — you'll want to prove exactly what 90% of your losses equals.
The bonus is the headline. The tax bill is the fine print. Read both before you deposit.