About 2,000 bettors went home happy after playing the mandatory-payout Rainbow 6 wager March 31 at Gulfstream Park. Thanks to new tax reporting and withholding rules put in place during the fall, the joy figures to spread through racing for quite some time.
Betting the Rainbow 6 on this year's Florida Derby day card at Gulfstream has provided the best example yet of how pari-mutuel wagering will benefit from the new tax reporting and withholding rules that redefine how 300-1 odds thresholds for reporting and withholding are determined on multiple-combination tickets for exotic wagers. In short, more than $4.5 million that immediately would have been collected by the U.S. Treasury in previous years instead stayed in bettors' hands that day.
Gulfstream offers a Rainbow 6 wager that only pays out the entire pool if there is a single winner. The exception to this rule is on mandatory payout days, when the entire pool is paid out to any horseplayers with the correct six selections (or highest number of correct selections, if no bettor hits all six).
The wager costs just 20 cents to play it straight, but most bettors play a number of combinations to try to cover various possible scenarios. With a massive carryover, a mandatory payout, and top-quality racing to entice bettors, the March 31 Rainbow 6 pool swelled past $16.5 million.
After takeout the 1,999 winning bettors each collected $9,513. Until the rules defining a big payout were redefined in late September, each one of those winning tickets would have been considered a 20-cent play. At that level every one of those winning tickets would have qualified as a payout above the 300-1 threshold--and because the payouts exceeded $5,000--each winning ticket would have seen the IRS immediately withhold 25%.
That policy would have resulted in the IRS immediately grabbing $2,378.25 from each of those winning tickets, leaving just $7,134.75 for each winner. That's a total of $4,754,122 that would have left bettors' hands and gone to the IRS. This year any ticket that cost a bettor $31.71 or more would not have had any money withheld. Horseplayers do have to report end-of-the year winnings but can claim losses against those earnings.
Gulfstream Park director of mutuels Ed Mackie conservatively estimated 95% of this year's winners would have spent $32 or more on their winning tickets. Using that estimate it's fair to say that more than $4.5 million stayed in bettors' hands thanks to the tax changes. Mackie actually believes the percentage of players who bet $32 or more is likely in the 98% range, but was being conservative.
"It really may only be two or three players who didn't spend that much money," Mackie said.
One of the on-track winners at Gulfstream was one of those who was subjected to the withholding. The player's winning ticket included three single selections that all won their races, along with seven horses, three horses, and four horses in the other legs--a $16.80 ticket.
In handicapping, sometimes you can be too good.