This tweet claims “winnings are taxed as gambling income, and subject to a flat 25% rate”. Is that the case, or are they taxed like normal income like the OP claims?
OP here: it is quite plausible that I am wrong, I am not a tax expert at all. I’m surprised to hear that gambling income is a flat 25% rate—I’ve always heard about lottery winners losing ~half their money to taxes. Quick Googling suggests that 25% might be the withholding rate rather than the tax rate: so if you make $1000 on gambling $250 will be withheld, but then you might actually owe more/less depending on your income the next time you do your taxes. That is a guess based on a few minutes cursory Googling though, I do not entirely trust it. If anyone can give a credible answer to this question I can update the article.
If you are going to try to make $ via prediction markets, consult an actual licensed tax preparer, cpa, or financial advisor.
You will likely have to set up a business of some sort (flat filing fee in most states in the hundreds of dollars range) in order to properly net out your costs against your winnings. The 2016 tax law changed the rules about hobby and gambling income to no longer allow you to deduct your costs, unless you itemize, which means unless you were already close to itemizing you end up paying 15% of your gross winnings, not of your net.
This tweet claims “winnings are taxed as gambling income, and subject to a flat 25% rate”. Is that the case, or are they taxed like normal income like the OP claims?
OP here: it is quite plausible that I am wrong, I am not a tax expert at all. I’m surprised to hear that gambling income is a flat 25% rate—I’ve always heard about lottery winners losing ~half their money to taxes. Quick Googling suggests that 25% might be the withholding rate rather than the tax rate: so if you make $1000 on gambling $250 will be withheld, but then you might actually owe more/less depending on your income the next time you do your taxes. That is a guess based on a few minutes cursory Googling though, I do not entirely trust it. If anyone can give a credible answer to this question I can update the article.
If you are going to try to make $ via prediction markets, consult an actual licensed tax preparer, cpa, or financial advisor. You will likely have to set up a business of some sort (flat filing fee in most states in the hundreds of dollars range) in order to properly net out your costs against your winnings. The 2016 tax law changed the rules about hobby and gambling income to no longer allow you to deduct your costs, unless you itemize, which means unless you were already close to itemizing you end up paying 15% of your gross winnings, not of your net.