A week after Delaware rolled out legal sports betting, New Jersey now also has cleared the way for such wagers.
Uncle Sam will be chomping at the bit for some of your winnings, though.
"The amount of gambling winnings, less any losses, gets tacked on to all other income you have … and is taxed as ordinary income," said Bill Smith, managing director at CBIZ MHM's National Tax Office in Washington.
Under legislation signed into law on Monday by New Jersey Gov. Phil Murphy, the state's three racetracks — and sites of former tracks — and Atlantic City's nine casinos will be permitted to offer the betting as soon as regulations are in place.
The New Jersey Racing Commission is scheduled to meet Wednesday afternoon to issue emergency rules that would allow facilities to offer sports betting quickly. Assuming the rules are adopted, betting could start as early as Thursday at any location prepared to take wagers.
The move comes a week after Delaware became the first state to take advantage of a U.S. Supreme Court ruling that struck down a 1992 federal law banning sports betting where a law wasn't on the books. Delaware already had a partial exemption to the law and offered parlay betting — multigame bets — on pro football.
Lawmakers in New Jersey — which had challenged the federal law banning it — passed their bill last week.
Other states moving toward offering it include Pennsylvania, West Virginia and Mississippi. The old law, the Professional and Amateur Sports Protection Act, largely outlawed sports betting outside of Nevada.
As for taxation of your winnings: The new tax law that took effect this year continues to allow winners to deduct their gambling losses up to the amount of gambling income, as long as they itemize their deductions instead of taking the standard deduction. The information gets reported on your Form 1040 as "other income."
Be aware that because the standard deduction nearly doubled for all taxpayers and most deductions were eliminated, fewer taxpayers are expected to have enough deductions to make itemizing worth it.
Professional gamblers, meanwhile, face other rules for 2018 through 2025: When they deduct their expenses (i.e., traveling to and from a casino), they must add them to their gambling losses when calculating the value of the deduction instead of writing them off separately as a business expense.
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Generally speaking, if your winnings are above $5,000, the payer, such as a casino, is required to withhold federal taxes. Effective this year, that withholding rate is 24 percent, down from the previous 25 percent.
However, don't assume the amount withheld is what you'll actually owe on the money.
"The casino doesn't know if you make $12,000 a year or $26 million a year," Smith said. "They withhold at that rate, but they don't know what tax bracket you'll be in."
Taxes also might be withheld on winnings of less than $5,000 in certain situations, such as if the amount won is 300 times the original bet (i.e., a $600 win on a $2 bet).
Additionally, depending on how much you win, you'll receive a Form W-2G from the casino. Even if you do not, the IRS still expects you to pony up at tax time.