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 (264) Leave your comment

  1. Hi, I am asking the following question for my 84 year old grandmother. She went with a friend to a casino in Miss and won $1700 on a pull machine. She cashed in the ticket and of course Miss took out their state taxes as well as take her personal info of SS#, DL… Well she lost $1200 of the $1700, Now she is frantic, she isn’t sure what she will owe.. she only gets her social security check each month, no other income. When I do a 25%, something I found online says that’s the standard % taken out, that will end up being $425 she will owe.. can anyone help.. not sure since she only has social security each month if she still has to pay.. thanks in advance.

  2. Can anyone assist me in determining about how much in taxes I will owe?

    I live in Las Vegas. I’ve won about $570,000. I make about $45,000 a year.

    It’s my understanding there is no state tax for the income (NV). About how much in federal taxes would I owe?

    Aside from that, thousands of dollars have been lost. Based on my information, and the profit/loss statement, should this help in the amount of taxes I will owe?

    Thanks so much!

  3. I won $21000 and trying to file late, I paid $900 calif. state taxes which I thought it was a right numbers. Turbo Tax says I owe IRS $1100 but get refund of $867 from state? I don’t know how they calculate!!!!??? I also claimed $21000 loss. My acct. say Tubo considered you winnings as lottery and that is why. Pleas help

  4. Hi I need help! A friend of mine wants me to cash a 10,000 ticket she won’t from keno but I’m afraid it will effect my taxes at the end of the year because I’m the one who cashed it and “won” but in reality Didn’t get a dime of the money just trying to help a friend out because she can not find her social security card and I have mine what should I do???? She’s leaving today at 1pm!!

    1. Sorry for the late reply …but i hope you didn’t do it. Yes it will affect your taxes. I had a similar ex perience with someone i didn’t even know. He asked me to cash out his ticket and said he would give me half! Of course i said no .I somehow think he may have been dis-associated from the 3 casinos in Detroit .. which means he would possibly be arrested for even being there if he tried to cash out.

  5. Hi I won a race at a race track in oklahoma it was about 10000.. thats what the check they are sending me… about how much am I gonna have to pay come imcometax

  6. If I lost $5000 and won $0 in entire year, and if my income is $65,000 per annum, do i get tax returns
    what i am paying to federal & state?

  7. my wife won 3000 in slot machines and we clain taxes together but she doesn’t work how much do we have to paid in taxes in nyc.

  8. Hello,

    I live in Las Vegas and I play high limit slots $25, $5 regulary and I have more than 100 W2Gs only from 2013 and I dont’t even have them all. I’ve lost $250k based on casino’s statment. In this case, would I be taxed more than $250k possibliy even though I’ve lost $250k already? I don’t think casino took out any percentages out of my willing jackpots. please help.

  9. I have 5 W-2G forms for $1200 each that I won at slots in Michigan Jan – Mar 2014. I was not smart enough to have taxes taken out. The casino never asked me either. What will my federal tax rate be on these winnings?

    1. Caroline,

      The total of $6,000 will be taxed as ordinary income on your tax return . The tax rate will depend on how much total income you have.

      For example, if the $6,000 is your only income for the year, then you will owe no tax.

      1. Caroline,

        W-2G forms are just one piece of the puzzle. At the end of the year, you’ll have a decision to make in regards towards how to file.

        You should get a win / loss statement from all the casinos you frequent and weight that figure (win or loss) against your standard deduction on federal tax forms if you don’t file long form for 1040. If you already file long form to take mortgage deductions, ect., then there’s no decision that way.

        Based on your win / loss statements, file the winnings as income and deduct the losses against it. If you have a NET loss, you can only deduct the amount against your winnings to result in a zero gain. You can’t deduct losses greater than winnings unless you’re a professional gambler and make your living doing so. (have to prove this…)

        Finally, as a State of MI filer, since MI uses your Adjusted Gross Income from federal form 1040 as the base income for filing MI income tax, and there is NO PROVISION in schedules to offset losses against those included wins, you’ll have to pay income tax on winnings for the State of MI no matter what! I didn’t know this until 2013 filings when I had $40k+ in W-2G forms even though I ended up a net loser (married filing jointly, my wife lost quite a bit!). In the end I had to pay 4+% income tax on shown winnings even though I had net losses! MI is one of the few states that does things this way (surprise, the tax and spend capital of the U.S.?) unfortunately. I know I’ve altered my gambling course radically, because of this.

      1. Yes. I understand that now. Michigan State tax is the one that will get me. Any Michiganers have an idea of how much i should put aside?

  10. Ok, I have a question. I have been to the casino near me pretty regularly. I’ve won and lost (losing more than winning mostly). I just got a copy of my win/loss statement the other day. According to the statement, I have wagered 5,000, won 4,500 Loss (500). Does this mean, come tax time, I will not have to pay any taxes since I am in the negative?

    1. Hi,
      You will have to claim your winnings, but you can also deduct your losses if you itemize your tax deductions. TurboTax will ask you the necessary questions for that you can accurately claim your winning and losses.
      Thank you,
      Lisa Greene-Lewis

      1. Lisa,
        If all Postolsfiring has is a year-end win/loss statement from the casino, how will he ever be able to report wins or losses. IRS says he can not net wins and losses. Even you said he must itemize to deduct losses. If all you have is a year end win/loss statement from the casino, how do you do that?

  11. I won 1,500 on a scratch ticket in CT the tax rate is 6.7 here. How much tax will they take out Thanks to who ever Helps me

  12. What if you wager on sports through an international, online betting website that has no “federal jurisdiction” in the US? Does that need to be subjected to US Tax Law even though the transactions occurred outside of the country? That seems absurd to me if so.

  13. Free slot pay
    If you win free slot play and actually don’t receive any money and are not sent a 1099 gambling winnings are you required to pay taxes on the amount of free slot play

  14. Hi! I didn’t claim my winnings. They were ” small” a couple $1200 or 1500. Winnings. I now received a bill from the irs. Can i go back and get my losses for last year and try and negate it? Or because i never claimed it , is it too late?

    1. Hi Pam,
      You can go back and amend your tax return. Just remember you have to be able to itemize deductions in order to claim gambling losses and your losses can not exceed your winnings. TurboTax will walk you through amending your tax return.
      Thank you,
      Lisa

      1. Not only do you have to be able to itemize, but you have to have a diary. If I was the IRS agent, and you didn’t report any wins, then suddenly came up with a diary of all you casino activities, I’d want to audit every entry…
        I’m not a tax expert, but my personal opinion is that in your case you’d be best off to just pay the taxes on the “small winnings”, and start keeping a daily diary for future use.

  15. I have question if I win 9500 at black jack do I have to pay taxes if not could I continue doing this repeatedly?

    1. According to the IRS, you must keep a diary and report all winnings. However, there are no W-2G’s issued at the table. Large cash transactions do get reported.
      Could you do this repeatedly? The casino has the odds in their favor, so to do it repeatedly, you’d have to be counting. If so, GO SEE THE MOVIE “21”.

  16. How much federal taxes should I have withheld from a $50,000 cash prize. Also, how much state tax should I withhold? I live in Upstate NY.

    1. Don’t withhold any tax unless you’re a federal employee, you won cash from a gambling event under federal jurisdiction, and you make a “voluntary agreement) with your employer to have tax withheld. Title 26 subtitle C and the IRS Federal, State, and Local Government’s semiannual newsletter is proof that gambling tax by the Federal Government applies only where the Federal Government controls the gambling event.

      1. Don’t withhold any taxes? I have to pay federal and state taxes on the cash prize I won, don’t I?

      2. No, the law does not require a non-federal individual to pay federal income tax, see subtitle C section 3401(c) where a employee is defined as a “federal worker” for payment of income tax, and note sections 3403 and 3404 where the employer is made liable for collection, making a return and payment of tax. Gambling cannot be lawfully taxed outside of federal jurisdiction.

      1. Mark, using rough numbers from the Federal tax table, and the 2013 NY State tax table, you would go $6,000 Federal withholding, and $2,800 State withholding.

      2. James really believes that most Americans are “taxpayers” for federal tax purposes, since he has told Mark how much taxes he would pay to the State of New York and to the United States. James most likely has never opened the IRC, Title 26 or its Regulations. He too is a “taxpayer”, committing perjury every time he signs a Federal tax form. in essence he is giving his hard earned money earned from a employer, to the IRS. The Government never turns down gifts in money from anyone!

      3. Just who is the IRS? You must know who this entity is and how it obtained its name. If you don’t know, then you will listen to the IRS and you will pay any tax they say you owe.
        Knowledge is power!

      4. I am not a federal worker and if I don’t pay the income tax now then in April when it is time to file my return they will want the money.

      5. t’s right Mark, they will “want” your money because you have always sent them money as a free gift. But, even Federal workers send in their money as a free gift since they have the choice of being liable or not liable for the tax.

  17. My win/loss statement says est tracked cash in $68,668.70, est tracked cash out $68,418.41, estimated tracked jackpot ($66793.41) and estimated tracked net win (net loss) ($250.29). What exactly do I report for tax purposes?

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