• A record 67.8 million Americans are expected to place an estimated $23.1 billion in bets on Sunday's Super Bowl.
• Whether you wager on the San Francisco 49ers or the Kansas City Chiefs, any money you win should be reported to Uncle Sam.

Sunday's Super Bowl between the NFL's San Francisco 49ers and Kansas City Chiefs will take place in Las Vegas, the gambling capital of the nation.

And a record 67.8 million Americans are expected to place an estimated $23.1 billion in bets on the game, up from $16 billion in 2023, according to the American Gaming Association.

But if you wager money, keep in mind that the U.S. government expects to participate in your gains, said Mitchell Drossman, national director of wealth planning strategies at Bank of America.

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"The IRS is your silent partner when it comes to anything that you win," he said.

This year's Super Bowl provides many opportunities to bet on the game, coin toss, half time or even Taylor Swift. Sportsbooks, for example, are offering wagers on bets such as how many times the pop star, who is dating Chiefs tight end Travis Kelce, will be shown on camera during the game telecast or whether she will get a mention in the MVP speech.

Most Americans — 42.7 million — are expected to place a traditional sports wager online, while 36.5 million will bet with friends or through a pool or squares contest.

Regardless of how you bet, the federal government will expect to see a cut of any proceeds, Drossman said.

All winnings must be reported for tax purposes

When you win a bet, there's no amount too small that you can say, "that doesn't need to be reported," Drossman said.

For example, if you wager $100 on the game and win $1,000, the $900 difference belongs on your tax return, he said.

In some cases, you may receive a Form W-2 G to report your gambling winnings. That generally applies to amounts of more than $600, according to Drossman.

And if you bet a larger sum, generally more than $5,000, there may be a mandatory tax withholding, he said.

Regardless of whether you receive a formal notice of your gains, you are obligated to disclose it to the IRS.

"Income is income," Drossman said.

It may be possible to deduct losses

If you bet and lose, it may be possible to deduct those losses, Drossman said.

But the catch is you cannot deduct losses in excess of your winnings, he said. So while you can net your gains and losses on bets you've made throughout the year, you cannot go below zero, he said.

For casual gamblers to deduct their losses, they need to itemize their deductions rather than take the standard deduction.

Most filers do not itemize deductions because the standard deduction is so large. In 2024, it is $14,600 for single filers and $29,200 for married couples who file jointly.

When it comes to state tax returns, it's important to note that some follow federal rules while others do not, Drossman noted. If you're filing in a state that taxes only gross income and does not allow itemizing, only your winnings will be taxed, he said.

Professional gamblers face different rules

For people who are professional gamblers, where placing bets is not just a hobby or sporadic activity, the tax rules are slightly different, according to Drossman.

For those individuals whose gambling is a livelihood, trade or business, itemizing is not necessary. Instead, they would file a Schedule C to report their gains as business income.

In that case, there is a broader array of expenses that may be deducted, such as travel and hotel expenses, Drossman said.

Notably, you have to have a certain level of gambling activity to prove that it rises to the level of a trade or business, he said.

Currently, 38 states and Washington, D.C., have legal sports betting markets. The two states that are home to the teams playing in this year's Super Bowl — California and Missouri — are among the remaining states that have not approved such gambling activity.