If you’ve recently struck gold at the casino, hit the jackpot in a poker tournament, or experienced the thrill of the lottery or any other gambling activity, you’re probably wondering about the potential tax implications.
Spoiler alert: all your winnings, big or small, cash or noncash must be reported to the IRS.
Whether you’re a seasoned or professional gambler or someone who simply got lucky at the bingo hall or in a fantasy league showdown, understanding the ins and outs of the gambling winnings tax is crucial.
We’ll dive into the nitty-gritty questions on your gambling wins and taxes and help to demystify the entire process for you.
Table of Contents
What types of gambling winnings are considered taxable income?How are gambling winnings taxed?Do sportsbooks and casinos report gambling winnings to the IRS?Are gambling winnings taxed on both the federal and state level?How to report your gambling winnings on your taxesAre the rules different for professional gamblers?Can you deduct gambling losses?
What types of gambling winnings are considered taxable income?
When comparing taxable vs. non-taxable income, all types of gambling winnings are considered taxable income. This applies even if you aren’t a professional gambler. If you win money from lotteries, raffles, horse races, or casinos – that money is subject to income tax.
When you win, the entity paying you will issue you a Form W2-G, Certain Gambling Winnings, if the win is large enough. This form is similar to the 1099 form and serves as a record of your gambling winnings and as a heads-up to the IRS that you’ve hit the jackpot.
You then must report all gambling winnings on your tax return. Even if you don’t receive the Form W2-G, you are still obligated to report all your gambling wins on your taxes. Whether it’s the slot machines or poker games, the IRS doesn’t discriminate when it comes to reporting your gambling winnings.
How are gambling winnings taxed?
When you win, your winnings are treated as taxable income. Even non cash winnings like prizes are to be included on your tax return at their fair market value.If you win, understanding when each type of gambling category is required to issue to report your winnings is important for you when gathering your tax documents accurately and with confidence.
Fantasy league winnings
If you win your fantasy football league (or if your league awards consolation finishers), it’s all taxable income in the eyes of the IRS. If you win $600 or above, the gambling facility should ask for your social security number so they can report your winnings to the IRS, but remember, even if you don’t receive a form reporting your income, you still have to claim your winnings on your taxes.
Casino winnings
If you win big at casino table games, such as blackjack, craps, or roulette, there’s no obligation for withholdings or the issuance of Form W-2G.
However, you still must report your winnings on your IRS tax return even if the winnings did not result in a tax form, so keep accurate records of all your buy-ins and winnings at casinos.
Poker tournaments
If you win more than $5,000 in net gambling winnings from a poker tournament, then this money should be reported on a Form W2-G. Keep accurate records of your wager or buy-in amounts, as this can be used to offset your reported winnings.
The organizers will issue Form W-2G for you to report with your tax return.
Bingo, keno, and slot machines
If you win more than $1,200 in bingo or slot machines and more than $1,500 in keno after the price of the wager or buy-in, then a W-2G should be provided to you for you to report on your tax return and a copy will also be provided to the IRS by the payer.
Do sportsbooks and casinos report gambling winnings to the IRS?
If you win at a sportsbook or casino, they are legally obligated to report your winnings to the IRS and to you if you win up to a certain amount ($600 on sports, $1,200 on slots, and $5,000 on poker).
Are gambling winnings taxed on both the federal and state level?
The tax rate on gambling winnings will typically vary from state to state. The majority of states have income taxes, which means that gambling winnings are likely subject to both federal and state taxation.
For federal taxes, there are two types of withholdings on gambling winnings: a regular gambling withholding (24% or 31.58% for certain non cash payments) and back withholding also at 24%. If your winning is already subject to regular gambling with holding you won’t also be subject to backup withholding.
The rules and rates of your gambling wins and taxes can vary significantly depending on your state. Some states take your gambling winnings tax at a flat rate, while other states tie it to your overall income tax rate. Check your state’s specific guidelines on their gambling winnings tax rate when it comes time to report your winnings.
How to report your gambling winnings on your taxes
Reporting your gambling winnings is a crucial step in getting your taxes done and staying in the good graces of the IRS. If you’ve won a substantial amount, the payer – whether it’s a casino, racetrack, sports site, or lottery commission – will issue you Form W-2G.
Form W-2G details your gambling winnings and any taxes withheld. It is a key document for when you file your income tax return, as you’ll need to include these winnings in your total income.
Even if your gambling winnings are not substantial and you were not issued Form W-2G, you are still required to report your winnings as part of your total income. Whether you won the lottery or a sweepstakes or simply enjoyed a bit of friendly competition, keeping track and reporting your gambling income is important to stay on the right side of tax regulations.
If you didn’t receive a W2-G for your gambling winnings taxes, you’ll report them on your tax return Form 1040 or Form 1040-SR (use Schedule 1 (Form 1040).
Are the rules different for professional gamblers?
If you engage in gambling activities as a means of livelihood and pursue it regularly as a professional gambler, then some rules can vary. However, deductions from losses that exceed the income of your winnings are still not allowed.
While casual gamblers only need to report their winnings as part of their overall income on their tax forms, professional gamblers may file a Schedule C as self-employed individuals. They may be able to deduct their gambling-related expenses, such as travel or casino entry fees, to determine their net income.
In regards to losses, deductions for gambling losses must be less than or equal to gambling winnings.
Can you deduct gambling losses?
You can deduct losses from your gambling, but only if you itemize your deductions and keep an accurate record of your winnings and losses. The amount of losses you deduct cannot be more than the amount of gambling winnings you report on your tax return.
Under tax reform, you can only deduct losses directly related to your wagers and not non-wagering expenses like travel-related expenses to gambling sites.
Deducting gambling losses: An example
Gambling losses can be deducted up to the amount of gambling winnings. For example, if you had $10,000 in gambling winnings in 2023 and $5,000 in gambling losses, you would be able to deduct the $5,000 of losses if you itemize your tax deductions.
If you had losses greater than your gains, you wouldn’t be able to claim the excess loss amount. Reversing the example above, if you had $5,000 in gambling winnings and $10,000 in gambling losses, you would only be able to deduct only $5,000 of gambling losses. The remaining $5,000 in losses would be lost forever; you can’t carry the losses forward to the next year.
Documenting gambling losses
Whereas your winnings are reported by the payer on a Form W2-G, your losses may not be reported. You will have to produce other documentation to validate the deduction. This can include:
- Wagering receipts or tickets
- Canceled checks
- Other receipts
It may also be possible to establish your losses by keeping some type of detailed log. This log should include information such as the:
- Date and type of gambling activity
- People you gambled with
- Amount of your winnings and losses
Get ready for tax time
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