How Are Gambling Winnings Taxed?

Income and Investments

Most people don’t think about taxes on their way to the casino. But what might seem like nothing more than a fun night in Las Vegas actually carries significant tax consequences if you win. As is often the case, the federal and state governments single out casino winnings for unique taxes of their own. Failure to properly report your haul can result in serious penalties and headaches you just don’t want.

Follow these rules to stay on the safe side:

How Much You Win Matters

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Gamblers are lucky in that casino taxes are not progressive like income taxes are. That is, you will owe the same percentage to the IRS on a $100,000 jackpot as a $10,000 one. Yet it’s important to know the thresholds that require reporting. As Bankrate.com explains, winnings in the following amounts must be reported:

  • $600 or more at a horse track (if that is 300 times your bet)
  • $1,200 or more at a slow machine or bingo game
  • $1,500 or more in keno winnings
  • $5,000 or more in poker tournament winnings
All of these require giving the payer your Social Security number, as well as filling out IRS Form W2-G to report the full amount won. In most cases, the casino will take 25 percent off your winnings for the IRS before even paying you. Don’t get any crafty ideas about cutting Uncle Sam out of the transaction, either. According to Bankrate, this entitles the casino to withhold up to 28 percent of your winnings.

Games exempt From Form W2-G

Not all gambling winnings in the amounts above are subject to IRS Form W2-G. According to CasinoGaming.com:
“W2-Gs are not required for winnings from table games such as blackjack, craps, pai gow, baccarat, and roulette, regardless of the amount.”
Note that this does not mean you are exempt from paying taxes or reporting the winnings. Any and all gambling winnings must be reported to the IRS (discussed in more detail below). It only means that you do not have to fill out Form W2-G for these particular table-based games. No reason is given; that is simply the decision the IRS made.

Reporting Smaller Winnings

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Even if you do not win as much as the amounts above, you are still legally obligated to report. This is done on Line 21 (“Other Income”) of Form 1040. This is also where you would report any awards or prize money you won during the year in question. Yes, even if you only win $10 you still technically have to report it (even if the casino didn’t). Gambling income plus your job income (and any other income) equals your total income.
Fortunately, you do not necessarily have to pay taxes on all your winnings. Instead, if you itemize, you can offset taxes owed on your winnings by reporting any losses you incurred as well. This would be done on Line 28 (“Other Miscellaneous Deductions”) on your Schedule A. You are allowed to claim as much as the total amount won that appears on 1040, which would eliminate your taxable gambling income. Just be sure any deductions taken this way (in combination with other itemizations) are higher than the standard amount. Otherwise it would make more sense not to itemize, even if it meant foregoing your gambling loss deductions.

What if You Win the Money at an Indian casino?

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Gamblers often inquire about taxes on money won at an Indian casino. Some assume that because Indian reservations have unique tax arrangements with the federal government, this somehow must extend to gamblers on their property. Sadly, that is not so. The IRS does not care if you won the money on Indian land, the Las Vegas strip, or anywhere in between.
If the casino hands you a W2-6 or 1099, the IRS got one too. Technically, this applies even at an illegal gambling hideout in someone’s basement. You are legally obligated to report income from illegal activities as taxable income. While we doubt any of our readers are deriving illegal gambling profits, it does illustrate how pervasive and all-encompassing gambling taxes are.

What About State Taxes?

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You didn’t think you were getting off that easily, did you? In addition to federal taxes payable to the IRS, many state governments tax gambling income as well. Unfortunately, states have their own unique formulas and rules for gambling income. Some levy no gambling taxes at all. Others charge a flat percentage, while still others ramp up the percentage owed depending on how much you won.
When in doubt, refer to your own state’s policies before gambling.

Comments (353) Leave your comment

  1. for I got my money. And now I have my w-2g form from them. And my question is is their any one out there knows petty much of what I might get back on it it’s only $4999 on the federal 

    1. Total Income Line 21 of the Form 1040………………………..$20,000

      Standard Deduction………………………………………………….. -6200

      Personal Exemption………………………………………………….. -3950

      Total Taxable Income…………………………………………………$ 9,850

      Tax Due from 2014 Tax Table……………………………………..$ 1,028

      Amount withheld on W2-G………………………………………….. -4999

      Refund Due Taxpayer……………………………$ 3,971

    1. Hi Kim O.

      Yes, provided that you are required to file a tax return, and I recommend that you do, you will report the $3700 as income on Line 21 of Form 1040.

  2. The major downside of gambling at all when you break even, is that if you win large jackpots and have a corresponding loss (so, you essentially break even), you taxable income is considered to include your winnings only (not your losses figured in). So, there are major tax implications of winning lots and then breaking even because your taxable income is much higher. This affects your ability to qualify for other deductions such as rental property losses, education, etc. I found this out the hard way.

    1. Steve, the two places in your post where you use the term “taxable income,” I believe you meant to say Adjusted Gross Income (AGI).

      On Form 1040, gambling winnings are totaled on Line 21, and that amount can increase total AGI, reported on Line 37, and again reported on Line 38.

      It is the increase in AGI that can negatively affect many tax credits and tax deductions.

      Taxable Income is determined on page 2 of the 1040, where we are able to deduct the large gambling losses by itemizing them on Schedule A. (Provided we have an acceptable gambling diary detailing wins and losses for the year.)

      We arrive at Taxable Income on Line 43 of Form 1040. And we have to watch out for the Alternative Minimum Tax on Line 45.

  3. HI–My taxable income for the year in MA was 43000. My spouse was 800. The Federal withheld for mine was 3638. I also have approx 16k in gambling winnings according to WG form. Will I have to owe money or get a refund? I also have 1 dependent.

  4. I am a poker player and won a drawing for $4700 while playing poker. This was the only significant win inside of drawings, jackpots, etc. for the year. Since, it’s poker, does this fall under the $5000 threshold? And will I need to report this?

    1. Joe, the threshold for a drawing is $600. You should receive a 1099 from the casino soon for the $4700. You are required to report the $4700.

      In addition, you are required to report all gambling winnings, whether or not they meet a threshold. The thresholds are for entities such as casinos, racetracks, bingo halls, etc., guiding them on what they are required to report about a player’s win, and how much they are required to withhold from each type of win.

      Prizes received with no wager (Drawings, Promotions, Bad Beat, Poker, etc.) have a $600 threshold for reporting. See the Gaming Withholding and Reporting Threshold chart in IRS Publication 3908 for an idea of gambling withholding.

    1. Kellie, the answer depends on your overall tax rate.

      If the entity that awarded you the system does not send you a W2-G, then you can manually enter the $2000 on Line 21 of your Form 1040 in TurboTax, and see how much that increases your tax.

      Depending on your total income, you could owe anywhere from $0 to about $800 in Federal income tax.

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