Sports Gambling and How Your Winnings are Taxed

Income and Investments SecondaryMod

Holiday decorations, gift exchanges, and sports gambling are in the air this time of year, with fantasy football players’ competitive tensions rising as we come closer and closer to the big game.

Are you feeling lucky? If so, you may be headed to the racetrack, casino or sports bar to make you bet, hoping to win big. However, you might be surprised to learn that Uncle Sam has his fingers crossed for your good fortune as well. That’s because you have to pay taxes on all gambling winnings.

Here are the rules.

Win at fantasy football or any other sports pool and your winnings will be considered income by the IRS. If you win at least 300 times and or the payoff is $600 or above, the gambling facility will ask for your social security number to send a form to the Internal Revenue Service.

You’ll also be subject to this reporting if you win $1,200 at slots or bingo or $1,500 at keno. Uncle Sam doesn’t have a place at the table during your weekly poker get-togethers with your buddies, but if you win $5,000 or more in a poker tournament the sponsor will be reporting your winnings to the IRS.

The news about taxes on gambling winnings doesn’t end there. The gambling institution is required to withhold 25% of your winnings as federal withholding tax. At tax time, for all reported winnings you’ll receive Form W-2G showing the amount you won and the taxes withheld. But even if you don’t receive a form reporting your winnings, you are still required to report all gambling winnings. In addition to gambling proceeds, you must report all other prizes you receive, including lottery winnings.

On the deductions front, you can’t directly offset your gambling winnings with your gambling losses, but you can include the losses as miscellaneous tax deductions on your tax return, if you itemize your tax deductions. If your losses exceed your winnings, the amount you deduct cannot exceed the total amount of your winnings.

Keep records of your gambling losses you claim on your tax return. You can do this by keeping a gambling log or hanging onto losing bet tickets, lottery tickets, and bingo cards.

Come tax filing time, don’t worry about knowing tax laws. TurboTax will ask you simple questions about you and give you the tax deductions and credit you’re eligible for based on your answers. If you have questions while doing your taxes you can connect to the TurboTax Live expansive network of credentialed CPAs, EAs, and Practicing Attorneys live via one-way video to get your tax questions answered. You can even have your tax return reviewed, signed, and filed.

Have fun, and I hope that Lady Luck showers you with wealth!

Comments (22) Leave your comment

  1. Using an online tax preparation software, I entered my lotto winnings of $2788.00, which reduced my refund by about $400, but when I entered my losses of $1757.00 on purchases of Lotto tickets, it only increased my refund by $25.00. Does this seem right, or do I need to take my tax forms to a professional, because I am obviously in over my head this time?

  2. I absolutely disagree with this article and it is making me lose faith in Turbo Tax. Fantasy sports winnings ARE NOT gambling winnings. They ARE NOT reported on Turbo Tax and what options there might be for any deductions against us. This is a very confusing topic – I think it needs it’s own article and should not be lumped in with gambling

  3. I am VERY poor…so poor I have no need to file federal tax returns at all. In the past 5 or so years I haven’t filed and figured the government could just keep any little refund I was entitled to even though I knew I was losing out on having it applied to back taxes and my student loans. But, in 2012 I won 6800 on a one dollar horse bet. Everyone I know that wins that much makes money, owns houses and cars, has jobs, etc, so they can’t advise me. Is there a way they will return the $1700 in federal money the track kept for the IRS if I file my 2012 now? My provable (online account) losses for the year might equal 1700, but not 6800, and it’s my understandingthat in horseracing it only matters what you bet THAT DAY.

  4. Hello Mary Ellen, I recently won a little more than $10,000 on fantasy football. I am a Canadian citizen. Do I need to pay tax?

  5. Hello, I live in Oklahoma and play the state lottery and scratchers and play at one of the local casino.
    I have never won enough at one time to claim, but in Sept. a group of us went to Vegas and I hit at the slot machine for 2200. Since it was in Vegas will I be taxed in Okla. and the Feds and can I deduct the air fare and hotel. Plus what about the loss on my losing lotto tickets and scratchers. I keep all my losers. Its shows I’m doing my part for the Oklahoma Education Lottery. LOL
    Thank You

  6. I think it is criminal how much money the federal and state taxes take from lottery winnings…don’t they make enough money from all the purchased losing tickets? I hit $20k on Megamillions and check was for $14,400. 25% to the feds, and 3% to NJ. Considering how much wasteful spending there is in Washington this just infuriates me. If our government wasn’t so corrupt, it would not have bothered me as much as it did. But knowing they stole $5,600 from me is disgusting. Only saving grace is that since they took the money out I won’t owe any additional taxes on it (right?!?!?!?!?)

  7. is this requirement of gambling place to withhold 25% for taxes new for 2015? Because my casino never withholds unless requested.

    1. Hi Carrie,

      The requirement to withhold taxes only applies to winnings of $5,000 or more and does not apply to winnings from bingo, keno and slot machines. There are other rules regarding the withholding of taxes that are found in the IRS instructions for preparing W2G forms at http://www.irs.gov/pub/irs-pdf/iw2g.pdf

      Thank you,
      Mary Ellen

    1. Hi erasmo,
      You can’t directly offset your gambling winnings with your gambling losses, but you can include the losses as miscellaneous deductions on your tax return. If your losses exceeded your winnings, the amount you deduct cannot exceed the total amount of your winnings.
      Thank you,
      Mary Ellen

  8. Turbo tax customer for multiple years but this year I will have a problem with entering W2G. So far this year I have 64 W2G’s so far. Is there anyway to scan these in? If no will the software allow over 60 different forms be menually entered?

    1. Hi James,
      TurboTax does not have a way to scan or import your W-2Gs. You can enter and e-file an unlimited number of W-2Gs in the federal program. However, several states have a limit on the number of W-2Gs that can be e-filed.
      If you are not e-filing your tax return, you do not need to enter more than the amount and the payee information from the W-2Gs.
      Mary Ellen

  9. I sold my rental property, how do I compute the amount to file on my 1040 Estimate. I sold the personal rental property on 9/22/14.

    Barbara J

    1. Hi Barbara,
      The calculation of the tax will be based on your total income, but you can estimate it by calculating the profit on your rental property and adding that to the rest of your income.Then you will need to estimate your itemized deductions. That income less the itemized deductions less your personal exemptions is your estimated taxable income. IRS Pub 505 (http://www.irs.gov/publications/p505/ch02.html#en_US_2014_publink1000194739) gives all the details, or you can use your TurboTax 2013 program to estimate your taxes.

      The profit on the sale of your rental property is the selling price less the selling expenses like fix-up expense and commissions less the original cost of the property (what you are depreciating plus the cost of the land) plus the depreciation you have taken (or should have taken) over the years it was rental property.

      Thank you,

      Mary Ellen

  10. I play lottery. I am on SS disability. I will be 66 in March 2015. what would Social security want from me if I were to win the “big” one?

    1. Hi Thomas,
      If you win the “big” one, or any winnings, for that matter, you will need to include the winnings in your federal income, and possibly your state income as well. The included winnings are taxable. They will also increase the amount of your SS Disability that is subject to federal income tax, up to 85% of it. IRS Pub 915 explains the rules for taxing SS Disability and other SS benefits. http://www.irs.gov/pub/irs-pdf/p915.pdf

      Thank you,
      Mary Ellen

    1. Mary,
      It depends on why you were in the case.
      According to IRS Publication 525, Taxable and Nontaxable Income, page 29
      “To determine if settlement amounts you receive by compromise or judgement must be included in your income, you must consider the item that the settlement replaces. The character of the income as ordinary income or capital gain depends on the nature of the underline claim.”
      You can find more details at http://www.irs.gov/pub/irs-pdf/p525.pdf

      Mary Ellen

  11. My husband wins gift cards sometimes and at the end of the year the company sends him a 1099 for them. Can we also deduct our lottery losses with this?

    1. The gift cards are not gambling income, they are prizes or awards, so you cannot deduct your lottery losses based on that income.

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