IRS actually helps horse racing
October 03, 2017 3:06 AM
by Jon Lindo
Nobody ever said beating the horse races was easy. But with major credit to the National Thoroughbred Racing Association (NTRA), the U.S. Treasury and IRS have adopted a modernized regulation regarding the withholding and reporting of pari-mutuel proceeds that will help buck the odds.
Previously, IRS reporting was required on any horse racing wager that generated a payoff of more than 300/1 based on the minimum base bet of the wager. The withholding of proceeds for taxes kicked in when the payoff of the winning wager was $5,000 or more.
As of last week, the reported winnings to the IRS still is required with a payoff at 300/1 or more, but instead of basing the odds on the minimum bet of the winning wager (for example a $1 Pick Four), the IRS will now consider the entire amount wagered in the pool as the base for the 300/1 threshold.
For example, a player spending $100 on a $1 Pick Four ticket (100 $1 combinations on the ticket) would now be subject to tax withholdings only if the payout exceeded $30,000 as opposed to the previously required $5,000 threshold.
The results of this new rule are simple and positive on all fronts for horse racing:
• Higher immediate return to the horseplayer, resulting in…
• Likely higher churn by applying those higher returns back into the pools, which…
• Generates higher handle for tracks, which…
• Increases purses, which…
• Increases demand for horses, which…
• Should increase field size, which creates…
• A more appealing product for the horseplayer.
The new IRS withholding rules have already had a positive effect on this horseplayer. I was fortunate to hit the Pick Five at Santa Anita on opening day Friday, Sept. 29, for $1,512.15. Previously, I would have had to fill out the W-2G form before I received my winnings based on the $.50 minimum bet.
However, since the total wager amount of my ticket was $108, the real odds of the payoff were 14/1, so there was no IRS reporting necessary.
Many ADW companies and most racetracks were able to get the software in place to begin the new rules as quickly as last Thursday. Others will follow as rapidly as possible. They are now at a decided disadvantage as most horseplayers have plenty of options on how to invest on a daily basis.
Santa Anita Notes
There was one astute horseplayer for whom the new tax laws will have no impact. There was one winning ticket (total ticket cost $243) that was able to nail down Sunday’s Pick Five at Santa Anita. The payoff? How about $351,257! My guess is the horseplayer won’t mind signing for that ticket.
The Santa Anita main track was extremely dull opening week, especially the stretch run. One mile dirt races run in times 1:41 and over were commonplace, and the fields were really strung out with many horses simply not handling the deep going.
The surface reminds me quite a bit of the first couple of weeks at Del Mar this summer. It took some time before the surface tightened up at Del Mar, so let’s see if the Santa Anita main track speeds up during this five-day race week. Since the meet is just 19 days long, there isn’t much time to make adjustments.
On the positive side, all running styles seemed to have a fair shot on the main track.
When I asked jockey Mike Smith about the main track on Sunday, he told me, “I like it. Fast horses are going to run fast and slow horses are going to run slow. It is safe.”
Bolt D’Oro was extremely impressive winning last Saturday’s Grade I Frontrunner Stakes, his first try around two turns. He completed the 1-1/16 miles in an impressive 1:43.54. That final time is even more flattering when you consider top 3-year-old filly Paradise Woods needed 1:44.34 to win the Grade I Zenyatta Stakes three races earlier, while the undefeated Moonshine Memories needed 1:46.32 to win the Grade I Chandelier Stakes just 30 minutes before Bolt D’Oro won.
Paradise Woods was assigned a 105 Beyer Speed Figure by Daily Racing Form, while I was very surprised to see Bolt D’Oro was assigned a Beyer Speed Figure of just 100. Even though that is the highest Beyer figure earned by any 2-year-old this year, it still seems low based on a visual interpretation of his win.
Santa Anita has quietly enacted a few rule changes, including the restriction of horses claimed during the meet from leaving to race out of state (with the exception of Stakes races) for 45 days or until the end of the meet. I am sure the rule will be tested legally, but I applaud Santa Anita for addressing a serious problem of horses being poached to race out of state and reducing our horse population in California.
For some unknown reason, Santa Anita is now weighing all horses scheduled to race as they enter the receiving barn prior to being saddled. I have not seen that information being reported to the public and even if the information is disclosed I am not sure how the general public can use it as a handicapping tool.
I guess I should just be glad they don’t require the owners to weigh in for the race, too.
Play of the Day
Santa Anita, Friday, Race 4 – Pomp and Party (8 post). Filly was a very game second at 29/1 vs. similar off the layoff at Del Mar Aug. 20 and won her only race at Santa Anita by daylight. Top trainer Phil D’Amato gives a live mount to apprentice Rueben Fuentes.
Jon Lindo is a syndicated handicapper, a long-time thoroughbred owner, and publisher of the Lindo Report that is distributed free each So Cal racing day at the following Boyd Gaming properties: The Orleans, the Suncoast, the Gold Coast, Sam’s Town, and Aliante. Jon is also a regular contributor to the Race Day Las Vegas Radio show on KSHP 1400 in Las Vegas and the Thoroughbred Los Angeles Radio show that can be heard in Las Vegas at www.thoroughbredla.com