In some cases, the tax (25%) is already deducted by the casino before you are paid your winning. However, if you fail to give your tax ID number to the payer, 28% of the winnings will be withheld instead of the usual 25%. Withholding is effected if your winnings minus your wager are above $5,000 or at least 300 times your wager. People spend more money on sports bets in Nevada, but New Jersey taxes the bets at a much higher rate The Monmouth Park Sports Book on the first day of legal sports betting in New Jersey, on June. In the United States, the tax rate owed on gambling winnings is a flat 25%. If you win big in Las Vegas at poker, the casino must withhold the 25% when collect your cashout, and provides you with IRS form W2-G to report your winnings to the government. Find out more on the IRS website. You might also owe state income tax on any money you win from betting on sports, depending on which state you live in. For example, Nevada doesn’t have a state income tax. But Maryland does, and it considers winnings from gambling taxable income. If you win money betting on sports, check with your state to see if it taxes gambling winnings.
Do you like to gamble? If so, then you should know that the taxman beats the odds every time you do. The Internal Revenue Service and many states consider any money you win in the casino as taxable income. This applies to all types of casual gambling – from roulette and poker tournaments to slots, bingo and even fantasy football. In some cases, the casino will withhold a percentage of your winnings for taxes before it pays you at the rate of 24 percent.
Casino Winnings Are Not Tax-Free
Casino winnings count as gambling income and gambling income is always taxed at the federal level. That includes cash from slot machines, poker tournaments, baccarat, roulette, keno, bingo, raffles, lotteries and horse racing. If you win a non-cash prize like a car or a vacation, you pay taxes on the fair market value of the item you win.
By law, you must report all your winnings on your federal income tax return – and all means all. Whether you win five bucks on the slots or five million on the poker tables, you are technically required to report it. Job income plus gambling income plus other income equals the total income on your tax return. Subtract the deductions, and you'll pay taxes on the resulting figure at your standard income tax rate.
How Much You Win Matters
While you're required to report every last dollar of winnings, the casino will only get involved when your winnings hit certain thresholds for income reporting:
- $5,000 (reduced by the wager or buy-in) from a poker tournament, sweepstakes, jai alai, lotteries and wagering pools.
- $1,500 (reduced by the wager) in keno winnings.
- $1,200 (not reduced by the wager) from slot machines or bingo
- $600 (reduced by the wager at the casino's discretion) for all other types of winnings but only if the payout is at least 300 times your wager.
Win at or above these amounts, and the casino will send you IRS Form W2-G to report the full amount won and the amount of tax withholding if any. You will need this form to prepare your tax return.
Understand that you must report all gambling winnings to the IRS, not just those listed above. It just means that you don't have to fill out Form W2-G for other winnings. Income from table games, such as craps, roulette, blackjack and baccarat, do not require a WG-2, for example, regardless of the amount won. It's not clear why the IRS has differentiated it this way, but those are the rules. However, you still have to report the income from these games.
What is the Federal Gambling Tax Rate?
Standard federal tax withholding applies to winnings of $5,000 or more from:
- Wagering pools (this does not include poker tournaments).
- Other gambling transactions where the winnings are at least 300 times the amount wagered.
If you win above the threshold from these types of games, the casino automatically withholds 24 percent of your winnings for the IRS before it pays you. If you cannot provide a Social Security number, the casino will make a 'backup withholding.' A backup withholding is also applied at the rate of 24 percent, only now it includes all your gambling winnings from slot machines, keno, bingo, poker tournaments and more. This money gets passed directly to the IRS and credited against your final tax bill. Before December 31, 2017, the standard withholding rate was 25 percent and the backup rate was 28 percent.
The $5,000 threshold applies to net winnings, meaning you deduct the amount of your wager or buy-in. For example, if you won $5,500 on the poker tables but had to buy in to the game for $1,000, then you would not be subject to the minimum withholding threshold.
It's important to understand that withholding is an entirely separate requirement from reporting the winning on Form WG-2. Just because your gambling winning is reported on Form WG-2 does not automatically require a withholding for federal income taxes.
Can You Deduct Gambling Losses?
If you itemize your deductions on Schedule A, then you can also deduct gambling losses but only up to the amount of the winnings shown on your tax return. So, if you won $5,000 on the blackjack table, you could only deduct $5,000 worth of losing bets, not the $6,000 you actually lost on gambling wagers during the tax year. And you cannot carry your losses from year to year.
The IRS recommends that you keep a gambling log or spreadsheet showing all your wins and losses. The log should contain the date of the gambling activity, type of activity, name and address of the casino, amount of winnings and losses, and the names of other people there with you as part of the wagering pool. Be sure to keep all tickets, receipts and statements if you're going to claim gambling losses as the IRS may call for evidence in support of your claim.
What About State Withholding Tax on Gambling Winnings?
There are good states for gamblers and bad states for gamblers. If you're going to 'lose the shirt off your back,' you might as well do it in a 'good' gambling state like Nevada, which has no state tax on gambling winnings. The 'bad' states tax your gambling winnings either as a flat percentage of the amount won or by ramping up the percentage owed depending on how much you won.
Each state has different rules. In Maryland, for example, you must report winnings between $500 and $5,000 within 60 days and pay state income taxes within that time frame; you report winnings under $500 on your annual state tax return and winnings over $5,000 are subject to withholding by the casino due to state taxes. Personal tax rates begin at 2 percent and increase to a maximum of 5.75 percent in 2018. In Iowa, there's an automatic 5 percent withholding for state income tax purposes whenever federal taxes are withheld.
State taxes are due in the state you won the income and different rules may apply to players from out of state. The casino should be clued in on the state's withholding laws. Speak to them if you're not clear why the payout is less than you expect.
How to Report Taxes on Casino Winnings
You should receive all of your W2-Gs by January 31 and you'll need these forms to complete your federal and state tax returns. Boxes 1, 4 and 15 are the most important as these show your taxable gambling winnings, federal income taxes withheld and state income taxes withheld, respectively.
You must report the amount specified in Box 1, as well as other gambling income not reported on a W2-G, on the 'other income' line of your IRS Form 1040. This form is being replaced with a simpler form for the 2019 tax season but the reporting requirement remains the same. If your winnings are subject to withholding, you should report the amount in the 'payment' section of your return.
Different rules apply to professional gamblers who gamble full time to earn a livelihood. As a pro gambler, your winnings will be subject to self-employment tax after offsetting gambling losses and after other allowable expenses.
Most states require you to pay taxes on gambling winnings. Of course, some states are friendlier than others when it comes to taxing your wins.
Certain places don’t charge any taxes when you win in gambling. You definitely want to consider betting in these states when you have the opportunity.
But what are the states that don’t tax gambling winnings? Of the states that do tax, which ones don’t charge you much?
This page discusses where you can gamble tax-free (minus federal taxes). It also covers what else you should know regarding taxes on real money gambling.
States That Don’t Tax Your Gambling Winnings
If you look at the gambling laws by state, nine states don’t collect taxes from your betting wins. That said, you’ll want to keep the following places in mind when planning your next gambling trip.
The Last Frontier doesn’t offer many gambling opportunities on its frontier. Alaska only provides legal casino cruise ships, bingo, and pull tabs. At least you don’t need to pay state taxes when winning through any of these activities, though.
With fewer than 974,000 residents, The First State isn’t overly large. Nevertheless, it does offer a thriving gaming industry that includes three racinos.
The Sunshine State boasts tribal casinos, poker rooms, and racetracks. Floridians also enjoy a 0% tax when winning at these gambling establishments.
Does Nevada Tax Gambling Winnings
With over 440 casinos, Nevada’s gaming industry needs no introduction.
The Silver State won’t level state taxes on any of the big jackpots you win in Las Vegas, Reno, Laughlin, or elsewhere.
The Granite State offers a few charity casinos and sportsbooks. You won’t need to pay taxes to New Hampshire when beating the bookies or casinos.
South Dakota may not have the largest population (885k). But it still offers 45 casinos and a bustling gaming destination in Deadwood.
The Lone Star State boasts one of the largest populations with 29 million residents. However, it doesn’t offer an abundance of gambling options compared to its big population. Texas features a few casinos (Class II only), horse tracks, and charity gaming venues.
The Evergreen State features a harsh stance on online gambling that includes felony charges. Triple triad roulette. Nevertheless, it does offer some betting opportunities, including tribal casinos, poker rooms, and racetracks.
Wyoming is the smallest state in terms of population (579k). It still provides some gaming venues, though, including charity casinos, horse tracks, and poker rooms.
States With Low Tax Rates on Gambling Wins
Most states do tax you to some degree regarding winnings, and some states have a high gambling tax. However, the following ones don’t take much from you.
The Grand Canyon State provides tribal casinos, horse tracks, and charity gaming. Arizona features a relatively low 4.54% tax rate on gambling wins.
The Hoosier State features several casinos, multiple sportsbooks, and regulated online betting. Indiana taxes winnings at a 3.23% rate.
Michigan offers 26 casinos, including three commercial venues in Detroit and 23 tribal establishments throughout the state.
It also features sports wagering and legal online gambling sites. The Wolverine State only charges a 4.25% tax rate on winnings.
Out of the states that tax winnings, North Dakota does it to the smallest degree at 2.90%. The Roughrider State provides tribal casinos, charity casinos, and lotteries.
Pennsylvania has become a mini-Las Vegas with 12 casinos along with poker rooms and sportsbooks. It only charges a 3.07% tax rate on gambling wins.
What If You Win in a State That Taxes Casino Winnings?
Only nine states let you off the hook regarding income tax on winnings. Odds are, you live in a state that taxes gambling profits.
That being said, take surrounding states and their taxes into consideration. Provided you live in/near a state with no, or low, gambling taxes, then you’re in good shape.
Federal Taxes Always Apply
Earlier, I covered nine states that don’t tax your wins in casinos, sportsbooks, poker rooms, etc. Even if you hail from one of these places, though, you still need to cover federal taxes.
Uncle Sam taxes your gambling winnings at 24%. This percentage is almost double the top rate in California (13.3%), which features the highest top-end gambling tax out of any state.
The federal government doesn’t expect you to only report jackpots or highly profitable years. It wants you to report every penny earned through gambling.
Of course, the IRS almost assuredly won’t hound you over a $10 winning Super Bowl bet against your friend. They will, however, care when you’re hitting jackpots and making serious profits.
A State Can Withhold Federal Taxes From Your Casino Wins
States are supposed to withhold federal taxes from large gambling payouts. Their casinos and sportsbooks will also issue a W-2G form if the win is big enough.
You need to fill this form out and give it to the gambling establishment. They’ll turn around and send it to the IRS before releasing your winnings.
Here are the guidelines on when bookmakers/casinos/poker rooms hand you a W-2G:
- $5,000+ payout in a poker tournament.
- $1,500+ payout in keno.
- $1,200+ payout through a slot or video poker machine.
- $600+ payout for a winning horse or sports bet (if win is 300x your stake).
Gambling Losses Are Deductible
As covered before, the IRS and state governments want you to report every dollar earned through gambling. However, you can deduct losses from winnings.
Everything that you wager and lose en route to winning counts as itemized deductions. These deductions reduce the amount of taxable income you’ll owe.
Here’s an example:
- You win $2,500 through a slot machine.
- You must report $2,500 under “other income.”
- You spend $1,700 to win this amount throughout the year (itemized deductions).
- $2,500 – $1,700 = $800 in reportable income.
You should record all of your gambling sessions for tax purposes. If the IRS ever comes calling for an audit, you’ll want evidence of your wins and losses.
The more information you possess, the better chance you stand of passing an audit with flying colors.
Can You Get Away Without Paying Gambling Taxes?
For the sake of avoiding any legal headaches, you should report gambling income and pay taxes on it. Of course, you may still wonder if it’s possible to get away without covering gaming related taxes.
Three potential reasons why you might wonder this include:
- You don’t want to mess with $50, or so, of gambling winnings.
- You don’t have records of losses and think that it’s unfair to cover taxes on wins.
- You win big and want to avoid paying taxes.
In the first two cases, you may feel justified in not covering taxes. Dealing with winnings can be a major headache in these situations.
In the third case, you likely know that failing to cover taxes on huge wins is wrong. But you may consider it anyways because you don’t feel like giving away a chunk of your payout.
Again, state governments and the IRS want you to report everything. They leave it up to you to follow the laws in your respective jurisdiction.
I suggest that you keep records and go the honest route with gambling taxes. This way, you don’t need to sweat if you’re ever audited.
Nevada Tax Rate On Gambling Winnings
One situation when you definitely want to report wins is if you receive a W-2G form. Casinos and sportsbooks send W-2G’s to the IRS.
Therefore, the taxman will have documentation that you’ve earned a big prize. You don’t want to give them a reason to audit by not covering taxes on a large payout.
States That Tax Gambling Winnings
Gambling Winnings Tax Nevada
Hopefully, you live in or near a state that doesn’t require you to claim gambling winnings on your taxes. In this case, you can win big and only worry about paying the IRS.
Gambling Winnings Tax Rate Nevada 2019
Chances are, though, you live somewhere that imposes income tax on winnings. If so, you should consider if there are any nearby options that either don’t tax gambling wins or at least feature low rates.
Maybe this issue isn’t of the utmost importance to you—especially when you’re only playing for small stakes. But if you play for mid or higher stakes, then you can save yourself some money by playing where there’s no/little taxes taken from wins.