As the 2026 FIFA World Cup kicks off this month, sportsbooks are preparing for an unprecedented windfall. Global betting on the tournament is projected to hit a staggering $150 billion, fueled by favorable North American match timings, an expanded 48-team format, and the explosive growth of legal mobile betting apps. However, millions of American fans looking to get in on the action face a hidden opponent off the pitch: new IRS tax rules that could force them to pay taxes even if they lose money.
With the tournament taking center stage, a recent survey by Paysafe (cited in a Kiplinger report) indicates that 29% of U.S. bettors will be placing wagers for the first time. Globally, roughly 60% of fans intend to bet where it is legal.
This influx of casual gamblers is already shifting the market. Experts predict that heavy betting on fan-favorite powerhouses like Spain and France will severely reduce payouts on those teams, forcing bettors to risk more capital for smaller returns. Furthermore, casual fans tend to favor high-scoring, entertaining matches, artificially inflating the odds on “over” goal predictions. Savvy gamblers may find better value in “under” bets. The sheer volume of incoming wagers is also raising concerns about potential sportsbook app slowdowns or outages during high-stakes matches.
Yet, the biggest risk for American bettors this year isn’t a blown call or a missed penalty kick—it’s the 2026 tax code.
The “Phantom Income” Trap In previous years, qualified gamblers who itemized their deductions could generally write off their gambling losses against their winnings. However, starting with the 2026 tax year, gambling losses can only be deducted up to 90% of total winnings.
Tax experts are warning bettors about a resulting phenomenon called “phantom income.” For example, if a bettor wins $3,000 early in the tournament but later loses $4,000, under the new rule, they can only deduct $2,700 (90% of their $3,000 winnings). The remaining $300 is classified by the IRS as taxable income, taxed at ordinary rates ranging from 10% to 37%. In short, a bettor who lost $1,000 overall could still owe the federal government money.
The situation is even more perilous for the roughly 90% of Americans who take the standard deduction. Because they do not itemize, they generally cannot deduct gambling losses at all. In the previous scenario, a bettor utilizing the standard deduction might be required to report the entire $3,000 as taxable winnings, entirely absorbing the $4,000 loss out of pocket.
Strict Reporting and State-by-State Nuances A common misconception among first-time gamblers is that taxes are only owed if the sportsbook issues an official tax form. While the IRS recently raised the automatic reporting threshold for sportsbooks from $600 to $2,000 (provided the winnings are at least 300 times the wager), federal law mandates that all gambling income must be reported, regardless of whether a form is generated.
The IRS calculates wins and losses by individual betting sessions, not by the final balance of a betting account. Financial experts strongly advise bettors to maintain meticulous records of every wager—including dates, betting slips, stake amounts, and outcomes. Because apps may not store data indefinitely, regular downloads of betting histories are essential.
Bettors must also navigate a complex patchwork of state laws. While states like Tennessee levy no state income tax on gambling winnings, others like Connecticut and Ohio may require reporting for winnings as low as $600. Online sports betting remains completely illegal in states such as California and Alabama. In Washington state, mobile sports betting is prohibited, and wagers must be placed physically at Tribal casinos.
For Americans traveling across borders to attend matches in host countries Mexico and Canada, domestic betting apps will likely be rendered inactive by strict geolocation technology. Travelers who choose to bet through international or local avenues must adhere to the host country’s laws—and remain aware that any gambling winnings earned abroad are still fully taxable by the IRS.
As the whistle prepares to blow on the largest sporting event of the decade, fans are urged to understand the local laws, track their wagers diligently, and stay highly aware of the new financial landscape to avoid a tax-season red card.
