The IRS treats your betting wins as income — but Social Security doesn't. What that gap costs a generation of Gen Z gamblers

That’s because — as far as the Social Security Administration is concerned — money won through gambling doesn’t count as income. That money is taxable, but it won’t count toward your income when it comes time to calculate your Social Security benefits.

That might not feel like a big deal now, but if you are one of the lucky few who make significant income from gambling, it will hurt once you hit retirement.

Winnings (and losses) affect your tax bill

Among Gen Zers overall, 17% report that they use sports betting as a financial strategy, compared to 10% for other adults, according to an Urban Institute survey. Most say that their primary incentive is to earn money.

When you earn money gambling, you still owe taxes on your winnings. That makes filling out your taxes more complicated (since that’s another form), and it also means you’ll probably have to pay a higher tax bill.

The good news is, if you lose money gambling, you can also deduct those losses. But you’ll need to itemize your deductions, and the amount you lost can’t exceed the amount of gambling income you report.

In other words, even if you win a lot of money through sports betting, you’re still going to lose a chunk of it through taxes. And whether you win or lose, your tax situation could get pretty complicated.

Betting income could result in smaller Social Security benefits

As far as the IRS is concerned, if you earned money — whether that’s at a traditional job, through self-employment, or by winning big on a sports betting app — that’s income, and income is taxable. But there are a lot of different types of income, and the SSA might treat it differently.

When calculating eligibility for Social Security benefits, only income that you paid Social Security taxes on counts. That includes money you earn at a job and self-employment income, but a lot of income — including your sports betting winnings — doesn’t count.