Change in IRS Withholding Regulations Seen as Key Reason for Increase in U.S. Race Wagering
November was the first full month where America’s horseplayers were receiving the benefit of the new IRS withholding regulations. The result was horseplayers keeping more of their winnings and reporting less to the IRS. Whether the increase in wagering for the month can be attributed mostly to the new regulations remains to be seen, but according to Equibase, total all-sources wagering on U.S. races was $890,823,840 in November, a 6.39% increase from the same month in 2016.
The IRS changed the way withholdings were computed on bets paying off at odds of 300-1 or more. Now the wagers take into account how much the player actually bet on his wager. The National Thoroughbred Racing Association (NTRA) has been lobbying for some time to change the regulation.
“The Equibase report of significant gains in wagering for the month of November correlates with reports of a 90%-95% reduction in the number of W-2G filings for the same period,” said NTRA President and CEO Alex Waldrop. “Whether the new tax reporting and withholding requirements are directly responsible for the increase in handle remains to be seen but, clearly horseplayers are keeping more of their winnings and reporting far less to the IRS.”
The Breeders’ Cup was held in November during both years and both months consisted of four, and not five, weekends. Average field size in November, 2017 was 8.25, almost identical to the November 2016 figure of 8.29.
The Breeders’ Cup itself was one of the first litmus tests for how the IRS changes might affect total handle. Despite a slew of longshot winners, only 35 winning tickets sold at Del Mar Thoroughbred Club triggered Internal Revenue Service reporting or withholding via automatic W-2G filings across the two-day Breeders’ Cup World Championships. The previous year, there were 1,333 W-2G filings that occurred on-track at the host site.
Breeders’ Cup wagering on track was up 21.4% this year.
Should the 6.39% increase in November prove to be a true gauge of how the new withholding rules have affected handle, the annual increase would be about $688 million.
Information provided by Equibase and Thoroughbred Daily News.