Log In
Sign Up. Fund Your Account. Place Your Bet. Get Started

Thursday Thoughts: Updated Tax Regulations

by Al Cimaglia

September 28, 2017

It always struck me as being unfair the way the IRS treated horse racing gambling winnings. Each bet was counted individually rather than the total cost of the ticket in determining IRS reporting requirements. Fortunately that will all change today because of a new rule adopted by the US Treasury.  Xpressbet account holders could benefit from the new rule immediately.  Here is more information about the changes. 

The NTRA has been actively seeking a change in how total wagers were calculated for many years and now the US Treasury has listened.  The original regulations were adopted back in 1978 and at that time the wagering menu was sparse. The choices were win, place, and show betting or the daily double. With the advent of multiple leg wagers as well as trifecta, superfecta and jackpot bets the original rule needed an overhaul. 

Because of the revised rule, estimates have been reported the total handle on horse racing would increase by as much as 10%, which could mean a significant difference in pool sizes. If the 10% estimates are correct, that translates into an increase of about $1 billion dollars in total handle.

To recap what has changed significantly is how bets are now calculated, it is based on the total amount bet into the pool rather than the base amount of each wager. The W-2G requirements are the same, 300-1 and collecting a $600 or higher payout. Also, winnings from a single bet of $5,000 or more are subject to immediate withholding.

One could argue the immediate withholding should change also. Many people have winnings withheld at a percentage well above their real tax rate. There have been estimates a dollar won at the track can get churned three or four times during the same day. But if it money is withheld from a large winning payout it may never be bet again.

The main reason 0.20 bets became the norm was to help shield horse players from W-2g requirements. From a personal standpoint the smaller minimum bet size took the luster off playing the superfecta, a bet I enjoyed. When the minimum bet for the superfecta was $1.00, there was a much better chances of hitting a larger payout. There will be those who will take the opposite view but the pool size for superfectas didn't increase over the years when it went to predominantly a 0.20 bet. In my world it's not a good thing when the pool size does not grow, but the ability to cover more combinations due to a smaller minimum bet size does increase.

Now that bet calculations are done differently one has to wonder if larger minimums for wagers in some races will follow. A 0.20 minimum at a track that has large Pick 4 pools is not so bad. In context, there is usually only one or two Pick 4's on a given card, or one Pick 5 or Pick 6. When the same bet can happen in almost every race, like trifectas and superfectas, having a larger minimum bet size makes sense.

Maybe it's logical to increase the bet size minimum to a dollar for a few races each card and examine the difference in pool size. My guess is at tracks with larger handles the pool size will increase not decrease in races with 0.50 or $1.00 bets rather than 0.20 minimums.

It will be interesting to see how changes unfold at various race tracks. One thing is certain, the new IRS regulations starting today are very positive for horse racing in general, and in particular for those who bet on the sport.

Want more?  Check me out on Twitter, @AlCimaglia.