Betting on March Madness Is Big Business

Where It’s Legal

Sports betting is legal in eight states—Arkansas, Delaware, Mississippi, Nevada, New Jersey, Pennsylvania, Rhode Island and West Virginia—plus the District of Columbia. Within the next few months, expect another 20 or so states to consider legalizing sports betting, including California and New York.

How to Wager

In short, you need to be there. Most legal sports betting has been limited to brick-and-mortar casinos. States are gradually rolling out mobile apps, but they’ll have strict GPS requirements to function.

There’s a Catch

Avoid the pitfalls of novice sports bettors. Don’t choose a team just because the odds look great, especially if it’s a parlay bet that requires several successful outcomes (for example, your team winning and having fewer fouls and more substitutions than its opponent). Avoid going all-in on an underdog after a win that might just be a fluke. (Rest in peace No. 16 UMBC, which pulled off March Madness’s biggest upset in history last year against No. 1 Virginia, then lost the next round.)

Uncle Sam Takes His Cut

The IRS considers your gambling spoils taxable income. Some states tax gambling winnings, too. Many casinos will automatically deduct taxes when you cash out. You’re allowed to deduct gambling losses from your taxes, but you must itemize, and the deduction can’t be larger than your total winnings for a given year.

QUIZ: Test Your Tax IQ: Surprising Things Taxed by the IRS

The Odds? Well, They’re Long

The likelihood of picking a perfect bracket is somewhere between one in 2 billion and one in 9.2 quintillion. Either way, it has never happened. In 2014, Warren Buffett offered $1 billion to anyone in the world who could nail a perfect bracket. Following some legal hiccups, he has since modified the award to $1 million a year for life and limited it to his 300,000 employees within Berkshire Hathaway. (As usual, the odds favor the house.)

QUIZ: How Well Do You Really Know Warren Buffett?