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Sports Betting Taxes in 2027: Why the Bill Lands on Bettors Next

By American.Bet TeamUpdated Oct 31, 202621+
Betting Taxes in 2027: the dome of the US Capitol, inside an outline map of the United States

For most of the first legal era, sports betting taxes were a problem for operators’ finance departments. That era is over. Between state legislatures hunting for budget money and a federal change to how gambling losses are deducted, the tax bill now reaches the bettor directly, and 2027 is the first full year in which every one of those changes is live at once.

Our read is simple: states have learned that sportsbooks complain loudly but keep paying, and they will keep testing that lesson. What changes in 2027 is how much of the cost gets handed down to you.

In this article 8 sections

The state tax wave: how a 15% norm became 20% and climbing

The 2025 budget season rewrote the rate sheet in several big markets. New Jersey lifted its tax on gross gaming revenue from 13% for sports betting and 15% for online casinos to 19.75%, after Gov. Phil Murphy had pitched 25%. Maryland’s Budget Reconciliation and Financing Act of 2025, House Bill 352, raised the mobile sports betting rate from 15% to 20%, well short of the 30% Gov. Wes Moore had asked for. In Louisiana, lawmakers passed HB 639 to move online sports betting from 15% to 21.5%, with a fiscal note projecting about $6.2 million in extra revenue a year.

Ohio is the warning light for 2027. The state already doubled its rate to 20% in 2023, and Gov. Mike DeWine then proposed doubling it again to 40% in his 2026-2027 budget, saying it could raise up to $130 million for sports facilities. Lawmakers left the rate at 20% that time, but Ohio writes its budgets in two-year cycles, and the next one is drafted in 2027.

The pattern matters more than any single rate. In almost every case the final number landed below the governor’s opening ask, yet above where it started. We expect 2027 negotiations to follow the same script.

Illinois per-wager tax: the experiment every state is watching

Illinois went further than anyone. From July 1, 2025, online sportsbooks pay 25 cents on each of their first 20 million wagers a year and 50 cents on every bet after that, on top of a graduated revenue tax of 20% to 40% introduced in 2024. Bonus-bet wagers count, and pushes incur the fee. Only DraftKings and FanDuel cleared the 20 million mark, and both said they would pass the cost to customers from September 1, 2025.

The results so far are the most useful evidence anyone has on what a per-bet levy does. Illinois Gaming Board figures reported by Covers show 25.5 million bets in March 2026, down 26.6% year on year, while handle fell only 6.7% to $1.39 billion. Adjusted revenue rose 35.3% to $129.2 million on a 9.3% hold, and the per-wager tax alone raised $10.9 million that month. February told a similar story: 20.6 million wagers, down 25%, while handle edged up 1.5% to $1.17 billion.

The numbers point to fewer, bigger bets. Surcharges and higher minimum stakes push casual players away from 50-cent and $1 parlays, while serious bettors consolidate. Rep. Daniel Didech filed HB 5143 to end the per-wager tax, but with Springfield’s finances tight, we think repeal is a long shot. Anyone betting in the state should check current minimums and fees on our Illinois sportsbooks page before placing small wagers.

Copycats: Michigan’s per-bet pitch shows the idea can travel

Illinois will not stay alone forever. In February 2026 Gov. Gretchen Whitmer’s fiscal 2027 budget proposed the same 25-cent and 50-cent per-bet structure, an end to free-bet deductions and a rise in the top online casino rate to 36% on revenue above $185 million. The administration projected $38.8 million from the per-bet fee, $21.1 million from the deduction change and $135.5 million from the casino increase.

House Republicans led by Speaker Matt Hall rejected the per-wager tax and said their caucus would not accept tax increases. That buys Michigan bettors time, but the proposal now exists as a ready-made template that any governor facing a Medicaid or education gap can lift. Our Michigan sportsbooks guide tracks the state’s current terms.

Promo deductions under fire: Colorado’s HB25-1311 sets the tone for bonuses

The quieter change may hit bettors harder than any headline rate. For years Colorado let operators subtract free bets from the proceeds they were taxed on. HB25-1311, signed on May 15, 2025, capped that deduction at 2% of bets in the second half of 2025, tightened it again for the first half of 2026, and under the session law text operators “shall not deduct any free bets” placed from July 1, 2026.

The state’s 10% tax is unchanged, but the effective base is now wider. A request for proposals from the Colorado Office of the State Auditor shows sports betting tax revenue climbing from $36.8 million in fiscal 2025 to $47.2 million in fiscal 2026, and a performance audit of the program is due by April 30, 2027.

When a free bet costs an operator real tax money, it becomes a smaller, rarer free bet. We expect fewer “bet $5, get $300” style offers in states that close the deduction, and more targeted, loyalty-style rewards for existing customers. Check live offers on our Colorado sportsbook promos page.

Federal gambling tax changes: the 90% loss cap and new W-2G line

Washington added its own twist. The One Big Beautiful Bill Act limits the deduction for wagering losses to 90% of those losses, for tax years beginning after December 31, 2025. Treasury released proposed regulations, REG-113229-25, in April 2026.

Our own arithmetic shows why it bites. An itemizing bettor who wins $10,000 and loses $10,000 in 2026 broke even, but can deduct only $9,000 of losses, so $1,000 of phantom income is taxable. High-volume bettors with thin margins feel this most, and the first returns showing it will be filed in early 2027.

The reporting threshold moved the other way. IRS instructions confirm that the W-2G minimum threshold for payments in 2026 is $2,000, adjusted for inflation each year after. According to EY’s summary of the proposed rules, that replaces $1,200 for slots and bingo, $1,500 for keno and $600 for other wagers, while poker tournaments stay at $5,000. Regular withholding of 24% still applies when winnings minus the wager exceed $5,000. Fewer forms does not mean less tax: all gambling winnings remain reportable.

Relief is not close. Rep. Dina Titus filed the FAIR BET Act in July 2025 to restore the full deduction, and in February 2026 she started a discharge petition that needs 218 signatures to force a House vote.

What to expect in 2027

  • More states raise rates in 2027 budget sessions. Ohio’s next biennial budget is the obvious candidate after DeWine’s 40% proposal, and New Jersey, Maryland and Louisiana have shown that hikes pass once they are folded into budget bills.
  • The per-bet tax gets another serious pitch. Michigan’s 2026 proposal matched Illinois’ 25-cent and 50-cent rates exactly; we expect at least one more state to float a per-wager fee in 2027.
  • Free-bet deductions keep disappearing. Colorado’s July 2026 cutoff and Michigan’s proposal make promo deductions an easy target, and welcome bonuses shrink where they go.
  • Higher minimum stakes and fees spread. Illinois shows operators protect margin by passing costs on, through surcharges and higher minimums rather than worse headline odds.
  • Holds stay elevated. Illinois’ 9.3% March hold reflects a parlay-heavy, promo-light mix that higher taxes encourage.
  • Tax-season sticker shock. The first returns under the 90% loss cap land in early 2027, and we expect that to revive pressure for the FAIR BET Act, though not necessarily passage.

The bottom line for bettors

Taxes rarely show up as a line item on your bet slip, yet that is exactly where they are heading. In 2027 the smart move is to read promo terms closely, see if your state adds per-bet fees, and keep a clean record of wins and losses for the IRS.

Gambling is for adults 21+ only where legal. If betting stops being fun, call 1-800-GAMBLER or visit GambleAware.org for free, confidential support.

Further reading on American.Bet

Will sports betting taxes go up in more states in 2027?

We expect so. Ohio drafts a new two-year budget in 2027 after its governor proposed a 40% rate, and Michigan’s 2026 per-bet proposal gives other states a ready template.

How does the 90% gambling loss deduction limit work for 2026 taxes?

For tax years beginning after December 31, 2025, itemizers can deduct only 90% of wagering losses against winnings, so a bettor who breaks even can still owe tax on 10% of losses.

What is the W-2G threshold for slot jackpots in 2026?

The IRS minimum reporting threshold for payments in 2026 is $2,000, up from $1,200 for slots and bingo, and it will be adjusted for inflation in later years.

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