More Than Half of Gen Zers Are Using Investment Dollars for Sports Betting. His $100,000 Win Could Add $0 to Social Security
More than half of Gen Zers are putting investment dollars into sports betting, and a six-figure winning year can look great on paper until you see what it does to your Social Security record decades from now.
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More than half of Gen Zers in one study said they were using investment dollars for sports betting, according to NPR’s The Indicator from Planet Money. A 27-year-old who counts his sports betting account among his investments has plenty of company.
Say he has $100,000 in gambling winnings for the year. The IRS will want its share. If he plays for fun, that $100,000 may add nothing to the Social Security earnings record that will set his retirement check decades from now.
Why the IRS Counts His $100,000 and Social Security Doesn’t
For a recreational gambler, sports betting winnings are taxable income. The IRS says gambling winnings, including sports-betting winnings, must be reported even if the bettor never receives a W-2G. That $100,000 can raise his federal income tax bill.
Social Security keeps a separate ledger. It builds a worker’s retirement record from covered wages and net earnings from self-employment. Recreational winnings fit neither category, so he pays no Social Security payroll tax on them.
Credits work the same way. In 2026, one credit is earned for each $1,890 in covered earnings, up to four credits for the year, and $7,560 in covered earnings earns all four. His windfall is $100,000. It earns zero credits.
What a $100,000 Year Is Worth at Retirement
Social Security calculates retirement benefits using a worker’s 35 highest years of covered earnings, adding them up and spreading the total across 420 months.
Here is the rough math. A $100,000 year of covered pay works out to about $238 a month when spread across Social Security’s 35-year calculation, before wage indexing. Depending on where the rest of his earnings land in the benefit formula, it could raise his check by roughly $36 to $76 a month for life, or about $430 to $915 a year.
That bump only happens if the $100,000 year pushes a zero or low-earning year out of his top 35. A $100,000 salary counts in full, since it falls below the $184,500 maximum taxable earnings limit for 2026. The $100,000 recreational gambling winnings count for nothing toward his Social Security earnings record.
When Gambling Becomes a Business in Social Security’s Eyes
The IRS says someone genuinely in the trade or business of gambling reports the activity on Schedule C, the self-employment form. The Social Security Administration likewise recognizes professional gambling as a trade or business that can generate self-employment income.
Two people can each clear $100,000 from sports and end up with very different Social Security records, while the professional pays self-employment tax and earns credits. The recreational player pays income tax only. The distinction depends on the facts and circumstances, such as how often he plays, what records he keeps, and whether he runs it like a business.
A W-2G Looks Like a W-2 but Does Something Different
A W-2 reports wages from a job and feeds the worker’s Social Security record. A W-2G reports certain gambling winnings for federal tax purposes. Getting one doesn’t turn winnings into wages.
Three Questions to Sort Out After a Big Year
Wages from a regular job still count toward Social Security as usual. The winnings sit on top, taxed but left out of his record. After a big year, he should address three questions:
- How much gambling income must he report? All of it, including winnings that never showed up on a W-2G. Keeping good records of losses matters, but recreational gamblers generally must itemize to deduct them; beginning in 2026 the deduction is limited to 90% of gambling losses, up to the amount of winnings.
- Is he a recreational player or running a real gambling business? The answer decides whether self-employment tax applies and whether the income builds Social Security credits.
- How much covered pay actually reached his record? He should check his earnings statement online each year to confirm his job wages show up correctly, since mistakes are much harder to fix years later.
What to Take Away
Gen Z may treat sports betting like investing, but the tax code and Social Security treat it as its own category. For a recreational player, paying income tax on winnings doesn’t build retirement credits.
What matters most is steady, covered earnings that fill all 35 years, along with a retirement account that keeps growing. A big winning year is a good time to sit down with a tax professional before filing.
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Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
