Taxes on Gambling Winnings in the US – How Much Are Betting Wins Taxed ? If you wonder about taxes on gambling winnings and have seen the famous Strip in Las Vegas, you know there’s no shortage of big money rolling around Sin City. There’s a reason for the opulence: The house wins more often than not.
The same can be said for gamblers and the IRS: If you win money by gambling in the US, you are subject to paying taxes whether you win $1 or $100,000.
Keep in mind that we are not tax professionals, this page isn’t a gambling or lottery tax calculator, and should not be considered legal advice.
What we can do, though, is provide information on reporting winnings, claiming losses and what could happen if you fail to report gambling earnings.
How Gambling Winnings Are Taxed
The IRS guidelines state that gambling income is defined by the following: winnings from lotteries, raffles, horse and dog races and casinos, as well as the fair market value of prizes such as cars, houses, trips or other non-cash prizes.
That said, those particular items do not constitute the full range of gambling winnings.
All individuals are subject to the flat rate.
The federal withholding tax, for US citizens, is 24% on a W-2G form. For non-US citizens it is 30%.
As for state taxes, gambling earnings are also subject to state tax (check your state for specific percentage taxed).
What Taxes do You Have to Pay on Gambling Winnings?
The amount of taxes on gambling winnings generally begins with $600 or more, coupled with 300-1 odds.
If you win $600 or more gambling, the casino or sportsbook (specified as “payer”) must issue a tax form W-2G.
When reporting your gambling winnings on form W-2G, federal taxes are withheld at a rate of 24%, even if you fail to give the payer a tax identification number.
Remember, taxes are due on winnings whether they come from an online casino or the real thing.
Tax withholding is activated when your winnings, minus your original bet, reach more than $5,000 from lottery/betting pools/sweepstakes as well as when your winning bet is at 300-1 or better odds.
If you have won more than $5,000, the payer may be required to withhold 28% of the proceeds for federal income tax with the withholding 31% if you fail to provide the payer with your social security number (SSN).
Slots, Video Poker and Keno
All slots and video poker winnings of $1,200 or more activate the need to be issued form W-2G.
For video keno, however, the IRS site has the triggering dollar amount at $1,500.
Table Games
Since any table game is defined as a “game of skill” in the eyes of the US government, a W-2G form is issued to any winner at odds of 300-1 or more, AND winning at least $600.
With craps, blackjack and roulette winnings, the customer is not issued a W-2G form, no matter the winnings.
The customer, of course, is still liable for taxes, given the guidelines in place when visiting the casino cage to collect your money.
That process demands your SSN and current ID.
Poker
Similarly, poker cash games do not require W-2Gs regardless of the amount won.
But again, minus your buy-in, your winnings exceeding $5,000 will require the payer to complete the tax paperwork with the customer.
Sports Betting
The $600/300-1 rule applies to sports betting. A W-2G is issued if your winnings reach $600 AND the payout was 300-1 or better.
At the $5,000 winnings level, the payer takes 24% immediately as a tax withholding.
Horse Racing
The 24% withholding is applied when winnings reach $5,000 and the amount won is 300-1 or better (300x the amount wagered).
Lottery
You don’t have to win the big jackpot to owe lottery taxes: The typical lottery tax is around 24% of winnings over $5,000, and the lottery agencies withhold it.
If your winnings push you into a higher tax bracket, you will probably have to pay additional taxes.
A large prize, for example, may put part of your income into the 37% tax bracket. Sites such as Nerd Wallet have a handy lottery tax calculator to make your life easier.
How Much Money Can You Win Gambling Without Paying Taxes?
Not every category of gambling winnings is regulated the same, so use the available resources and tools to determine those requirements.
Whether your gambling winnings are $1 or $1 million, you are expected to report them to the IRS.
Will the IRS Know if I Don’t Report My Winnings?
The IRS has the autonomy to discover unreported gambling winnings, so it’s best to pay the taxes.
Find the reporting spot under the “other income” section on the traditional 1040 tax form to avoid running into trouble.
Casinos and sportsbooks have W-2G forms and most will give you one, but if they don’t — and top online sportsbooks often don’t — it’s still your responsibility to report winnings that reach the taxable thresholds.
Regardless, casinos are required to report your winnings at or above the thresholds to
the IRS.
There are penalties for not reporting gambling winnings, including fines and even criminal prosecution.
The IRS could scrutinize your income with help from W-2G forms as well as monitoring bank deposits.
If you are found to be hiding more than $5,000 or 10% of your final tax responsibility, the IRS can level a 20% financial penalty.
How to Report Your Gambling Winnings
Unless your winnings trigger the W-2G form, you would report the winnings on your tax form, line 21, form 1040.
If you are opting to itemize deductions, use line 27, Schedule A of the 1040 form.
For deductions, make sure you are able to use receipts, bet slips, statements or other records showing winnings and losses.
For more information on this kind of record keeping, the IRS suggests you refer to Publication 529, “Miscellaneous Deductions,” or Publication 525, “Taxable and Nontaxable Income” under the “Forms & Pubs” section.
Can You Claim Back Losses?
You can claim losses on your gambling winnings by using deductions on your tax form.
You can also claim certain losses such as expenses to and from the casino if you itemize taxes rather than take the standard deduction.
(This is with the caveat that these deductions don’t exceed gambling winnings claimed. You are legally able to claim your losses only to an equal level of your reported winnings.)
Professional Gamblers Are an Exception
If you identify as a professional gambler, your profits are treated differently.
That’s because gambling profits are your primary (self-employed) source of income.
You would report gambling winnings/losses on Schedule C. And you’re also able to deduct business-type expenses such as travel and seminar/educational expenses.
You also pay self-employment tax on net winnings.
Bottom Line
First, when taking the steps to report your gambling winnings on your tax return, itemizing your deductions and considering your expenses, it’s a good idea to consult a tax professional to ensure you’re on the right path.
You must report those winnings as income including such activities as bets and winnings from lotteries, horse racing, dog racing, casinos, raffles and reporting the fair market value of prizes won. These include cars, houses, trips etc. Basically all those non-cash prizes.
Remember: you are expected to pay taxes on gambling winnings in the US, so don’t get caught out.
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