The “Fight of the Century” is about to happen in Vegas this coming Saturday. The Mayweather & Pacquiao fight includes the two best boxers in the world. Seats at the MGM Grand are going for up to $7,000 each. HBO expects to take in over $300 million in Pay-per-view fees.
But it won’t be just the boxers, the hotel, and the TV execs who will be making big bucks next week. Lots of big-time celebs are making lots of big-time wagers on the event. Rapper 50 Cent reported has put up over $1 million on Floyd Mayweather. Fellow rapper/businessman P Diddy has wagered $1/4 million on Mayweather; it’s a bet he made with movie star Mark Wahlberg, who’s put his $1/4 million on Manny Pacquiao.
All this means boxing fans world wide won’t be the only ones watching on Saturday.
The IRS will be watching, too.
Regardless of whether you wager $25, or $250, or $250 million, remember that gambling winnings are considered income – no matter the amount – and are reportable on your federal income tax return.
If you frequent places like Churchill Downs or 7-11 (“Sir, would you like a lottery ticket to go with your Big Gulp?”) then you already know what a federal form W-2G, Certain Gambling Winnings is. A form W-2G is used for wagers when the winnings, after the cost of playing, are $600 or more and at least 300 times the amount of the wager.
But even if you don’t get a W-2G, gambling winnings are reportable. So what’s your wager? Inquiring (IRS) minds want to know!
Oh and by the way, gambling winnings don’t just include cash as far as Uncle Sam is concerned. They also include non-cash payments like watches, electronics, vouchers and whatever else. Which means that when Wahlberg joked to Diddy “I want that diamond,” (referencing Diddy’s earring), the result would be the same for tax purposes. Doesn’t matter whether he gets the cash or the earring!
ANCHOR ON THIS: The Mayweather & Pacquiao Fight is big money. Big for HBO, big for Vegas, big for everyone–including the IRS. Whatever your wager, enjoy the fight. But should you come out a big winner on Saturday, make plans on Monday to connect with a tax pro so you can reduce Uncle Sam’s tax bite on April 15th.