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SF 605

A bill for an act relating to state income tax withholdings on winnings from sports wagering, and including effective date provisions.

2025-2026 Regular Session

Iowa withholds state tax on sports-wagering winnings whenever federal withholding applies, remits to the Department of Revenue, and treats 99F winnings as earned income.

Signed by Governor.
#gambling #incometaxes #internalrevenuecode #revenuedepartment #sportswagering
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WeVote Research Nonpartisan
Bill Summary · SF 605

Summary — S.F. 605 (signed March 28, 2025)

A bill relating to state income tax withholdings on winnings from sports wagering; amends Code sections 99F.18 and 422.16(2)(d). Effective January 1, 2026.

Purpose / Intent

To make winnings from sports wagering clearly subject to Iowa income tax and to require state income tax withholding on sports wagering winnings whenever federal income tax withholding is required for the same winnings under the Internal Revenue Code. The bill also clarifies remittance procedures for amounts withheld.

Key provisions

  • Amends Iowa Code §99F.18
    • Explicitly states that all winnings from sports wagering authorized under chapter 99F are “Iowa earned income” and subject to state and federal income tax laws.
    • Requires that any amount deducted from such winnings for payment of state tax (pursuant to §422.16(2)) be remitted to the Iowa Department of Revenue on behalf of the winner.
  • Amends Iowa Code §422.16(2)(d)
    • Retains existing withholding thresholds for other gambling:
    • $600 threshold for activities under chapters 99B or 99G
    • $1,000 threshold for activities under chapter 99D
    • $1,200 threshold for slot machines under chapter 99F
    • Adds: state income tax must be withheld on winnings from sports wagering (chapter 99F) whenever federal income tax must be withheld from the same winnings under the Internal Revenue Code.

Who is affected

  • Sports wagering operators (online sportsbooks, casino sportsbooks): must withhold and remit state income tax when federal withholding is required and remit withheld amounts to the Iowa Department of Revenue on behalf of winners.
  • Bettors/winners: those with sports wagering winnings subject to federal withholding will have state tax withheld at the time of payout, reducing the immediate net payout.
  • Iowa Department of Revenue: will receive and process withheld state tax remittances and associated reporting.
  • Entities currently handling withholding for other gambling activities (casinos, racetracks, charitable gaming operators) — no change to their existing thresholds except alignment of sports wagering to federal withholding rules.

Procedural / timeline notes

  • Introduced: March 12, 2025; committee-approved and moved rapidly through both chambers.
  • Passed Senate: March 18, 2025 (yeas 48, nays 0).
  • Passed House: March 19, 2025 (yeas 96, nays 0).
  • Signed by Governor Kim Reynolds: March 28, 2025.
  • Effective date: January 1, 2026.

Potential impacts

  • Administrative: Sports wagering operators will need systems to detect when federal withholding applies and to perform state withholding/remittance accordingly.
  • Fiscal: Expected to increase state tax collection compliance on sports wagering winnings; immediate cash flow effect for winners when taxes are withheld at payout.
  • Compliance alignment: Links state withholding for sports wagering to existing federal withholding triggers rather than creating a separate state-only threshold.

Sections amended: Iowa Code §99F.18 and §422.16(2)(d).

Compiled from official sources — confirm details with the bill’s official record.

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