Gambling Taxes

Gambling taxes on your winnings are not exempt. If you are a U.S. citizen you owe Uncle Sam a share, regardless if won here or abroad. The IRS considers all gambling winnings taxable income, even if it’s an amount that does not get reported to the IRS by the payer, like that $20 win on a scratch off ticket, or a lucky $250 when your numbers hit, even a $1,000 jackpot on your favorite slot machine. Sadly, gambling taxes are due.

So what does get reported to the IRS? Larger amounts that are won at gambling establishments such as casinos, lottery retailers, horse race tracks and off-track betting parlors. They will issue a form W-2G, one copy to you and one to the IRS. Here are some details:

Gambling Taxes on Winnings

Machine Games

$1,200 or more won at a slot machine, video poker, video keno, video blackjack, etc. This only applies to a single jackpot payout amount. Accumulated credits are credit meter wins and do not count.

$1,200 or more won at a live bingo game will also trigger a W-2G, and $1,500 or more at a live keno game (minus your wager amounts).

The casino will not withhold any gambling taxes from awards in the $1,200 to $1,500 range provided you present a valid photo ID and social security number. If you do not provide this information, 28% will be withheld.

Live Table Games

Winnings from live table games are not reportable on a W-2G, except if there is a very large prize amount offered for a small wager, such as a dollar bet for a shot at a progressive table jackpot, where the winning odds are over 300/1 and the win is more than $600. For example, Caribbean Stud offers a huge progressive jackpot for wagering only $1, if you’re lucky enough to hit a Royal Flush.

If you win $600 or more in any other wagering game, such as horse, dog racing or sports betting, and the amount is at least 300 times your bet minus your wager amount, the establishment will gift you with a W-2G. If your winnings exceed $5,000 and the amount is more than 300 times your bet, 25% will be withheld. The same withholding percentage also applies to any cash prize of $5,000 or more in poker or other card tournaments minus the buy-in amount.

Winnings on state lottery games such as lotto, numbers, scratch-offs, etc can be collected at your local retailer up to $600. Any more and you'll
have to visit the main lottery office in your community, where a W-2G also awaits you.This information is from the New York lottery. Other states may have different rules.

Winnings on Daily Fantasy Sports (DFS) contests at this time are considered games of skill. DFS sites will issue a 1099-MISC, not a W-2G for winnings of $600 or more. 

 Taxes on VLT’s

$600 or more in winnings from any class II Video Lottery Terminal (VLT) game will also invite a W-2G. This includes any winnings on machines at jurisdictions that are operated by a state lottery. For example, New York State has nine race racks with VLT’s that are pseudo slot and video poker machines.

Deductions

The good news in all of this is that gambling losses are tax deductible but only up to the amount of your winnings, and only if you itemize deductions on your tax return.

The IRS wants to make sure that you indeed lost what you claim you lost, so a record of all your losses is required. Win- loss statements are available from most major casinos at the end of the year, provided you used your player’s club card when playing machines. 

For losses on DFS contests, the IRS position at this time is unclear. Because of the skill factor, your winnings are in the hobby category. Therefore any gambling losses would not be deductible, although this situation could change at any time.   

You don’t have to record the tickets on your tax statement, but they may be necessary if you are audited. All the IRS wants to know is the type of wager, the amount of the bet and the date of the transaction.

Always play it safe and check with your tax preparer for your personal needs. For additional information about tax requirements for gambling winnings log and search Gambling Winnings.

Good Luck!

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