From 24/7 Wall St. · Gerelyn Terzo · · 1m
Social Security Tax Quirk Costs Retiree $2,500
Retiree's $20,000 sports betting loss triggers $2,500 IRS tax on Social Security.
In brief
Retiree's $20,000 sports betting loss triggers $2,500 IRS tax on Social Security. A retiree who won $20,000 on sports bets and lost it all faces $2,500 in federal taxes on his Social Security benefits due to IRS rules. Originally reported by 24/7 Wall St..
Retiree's Gambling Win and Loss
A 64-year-old retiree won $20,000 betting on sports then lost it all.
Social Security Benefits Taxable
His $2,000 monthly Social Security benefit becomes partially taxable due to gambling winnings.
IRS Tax Code Quirk
The IRS treats gambling winnings and losses in separate categories, with losses only deductible if itemizing.
2026 Gambling Loss Deduction Limit
Starting in 2026, the IRS limits gambling loss deductions to 90% of losses or winnings, whichever is smaller.
Taxable Income Calculation
His combined income jumps to $42,000, making $11,300 of Social Security benefits taxable.
Tax Bill Result
He owes $2,500 in federal taxes for a year where he didn't make a profit from gambling.
The main idea
A retiree who won $20,000 on sports bets and lost it all faces $2,500 in federal taxes on his Social Security benefits due to IRS rules.
