Taxes on Gambling Winnings: ?? W2G & More

?? Taxes on Gambling Winnings

The gambling operator (casino payer) is required to issue winners a W-2G form when you get gambling winnings or have or have any gambling winnings which are subject to federal income tax withholding.

Players must report all gambling winnings on Form 1040 or Form 1040-SR. This should also include winnings that aren’t reported on the W-2G form.

Gambling operators are also required to fill form 1042-S to report gambling winnings paid to non-resident aliens and foreign corporations.

?? W2G Form Example

You can click here to download an example W2G form. We also recommend that you visit the IRS webpage to download the latest edition of the form.

Form W-2G for certain gambling winnings requires the payer, such as a casino, to provide the winner’s name, address, date of winning, type of wager, withheld state taxes, etc.

Gambling Winnings Tax Estimate

With gambling winnings, you may be required to pay an estimated tax on that additional income accruing to you. Tax payers need to consult the publication 505 for more information on ‘Tax Withholding and Estimated Tax’. For specified winning sizes, any instant withdrawal casino site will withold federal taxes.

?? W2-G Triggers, Gambling Taxes, and Casino Games

Here are the tax incidences for different casino games that pay real money sourced from the BetMGM website.

Sports and Casino tables

This also includes live or non-live, software games such as Roulette, Blackjack, and Baccarat – games that require skill. The threshold of winnings must be at least $600 and 300x the bet.

• $600 and greater but less than $5000:taxable but no tax withheld at casino source site.
• $5000 and more: taxable immediately; taxes must be withheld.
• Casino Hand Pay Tax : Taxes are 24%at federal jurisdiction and taxes at state level vary by state.
• Taxable amount calculation: win minus the bet.
• Free bets are not deducted from the gambling win. W2Gs arrive at the end of the financial year.

Poker – tournaments and Taxes

• $5,000 win for W2Gs activation.
• Winnings are reduced by the wager amount.
• Taxes are 24% at the Federal level.
• taxes at state level: vary by state.

Slots and Taxes

Casino games that are Video Poker (Random Number Generated software-based) game are also treated as ‘Slots’. Such wins are reported by an online casino for any win of $1,200 or more.

?? Instruction to Winners: When to Furnish Form W-2G

How are gambling winnings taxed exactly? The casino or betting operator has to furnish form W-2G when the gambling winning is :

1. $1,200 or more in from bingo or slot machines. IRS may raise this to $5,000 in very near future (SLOT Act update).
2. $1,500 or more in winnings from keno
3. More than $5,000 in winnings from a poker tournament
4. $600 or more in gambling winnings and the payout is at least 300 times the amount of the wager (betting). This does not include winnings from bingo, keno, slot machines, and poker tournaments mentioned already above.
5. Any other gambling winnings where the federal income tax withholding applies. Federal income tax must be withheld on certain winnings by the operator minus the amount of the wager.

? SLOT Act Update

The Congressional Gaming Caucus was originally formed in the 20th century. It was meant to be a vehicle for for gambling and casino companies to have their say on Congressional issues. Chief Deputy Whip Guy Reschenthaler and Representative Dina Titus are the co-chairs of the bipartisan Congressional Gaming Caucus. They sent a letter on February 5, 2024 to the Internal Revenue Service (IRS) Commissioner Danny Werfel and supported the IRS Advisory Council’s (IRSAC) recommendation on increasing the reporting threshold for slot machine jackpot winnings by amending the Shifting Limit on Threshold Act (SLOT) Act. The American Gaming Association (AGA), tribal gaming industry, and other stakeholders also supports this change. There is, so far, no voice opposition to the proposed changes. On 5 May, 2024 they reintroduced the legislation to update the SLOT Act and amend the 50-year-old and outdated reporting threshold.

The change in reporting threshold accounts for inflation where $1,200 ceiling could be now $5,000 without any reduction for the amount wagered. Over 21.2 million W-2G tax forms were filled in 2022 alone because of this low threshold! The authors of the letter also suggest that periodic revision of this threshold should also be considred as a permanent measure. The Reagan-era gaming regulation has not been updated after 1977 even as slot jackpots have increased manifold!

As you may know, slot machine jackpot winnings of $1,200 or more require a W-2G tax form. The antiquated threshold, which has been static since 1977, has led to a significant increase in the number of W-2G forms filed each year…Due to inflation, this leads to increasing compliance burdens on taxpayers and significant operational costs for casinos that are providing family-sustaining jobs in our states. Furthermore, unlike other forms of tax information that report actual income, W-2G forms only capture a singular jackpot and do not report on a patron’s ultimate taxable gain or loss from slot play.

Congresswoman Dina Titus represents Nevada’s 1st district and this amendment is certaily a priority for her constituents in Las Vegas. She has been consistently trying get the Reagan-era regulation changed which holds the growth of legal gaming across the US. She introduced bills in 2020 and 2022 but those efforts did not produce the results. Check out the amendment to the bill at this link.

Details of Proposed Amendments

• SLOT MACHINES: Section 6041 of the Internal Revenue Code of 1986 is proposed to be amended by adding at the end the following new subsection: No return shall be required 9 under subsection (a) in the case of a payment in the course of a trade or business of winnings from one slot machine play unless the winnings from one such play are at least $5,000 (without reduction for the 4 amount wagered).
• INFLATION ADJUSTMENT —In the case of payments in any calendar year beginning after 2024, the $5,000 amount above shall be increased by an amount equal to — (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, deter mined by substituting ‘2023’ for ‘2016’ in sub paragraph (A)(ii) thereof. Any future increse is to be rounded to the nearest multiple of $100.
• EFFECTIVE DATE: shall apply to payments after December 31, 2023.

? Sweepstakes Casino Taxes

Gamblers need to file Form W-2G, Certain Gambling Winnings, to report gambling winnings and any federal income tax withheld on those winnings by the gambling site. Players need to provide a statement to the winner (Copies B and C of Form W-2G). Sweepstakes winnings are also covered in the types of gambling under the following four headings.

• 1. Horse Racing, Dog Racing, Jai Alai, and Other Wagering Transactions.
• 2. Sweepstakes, Wagering Pools, and Lotteries.
• 3. Bingo, Keno, and Slot Machines.
• 4. Poker Tournaments.

How to Pay and Not Pay Taxes on Gambling Winnings

• Report comprehensively: You need to report all gambling winnings under the “Other earned income” line of Schedule 1 (in Form 1040 meant for US individual income tax return). Attach the copy C of form W-2G with it if you have one.
• Deduct Losses: You are allowed to deduct gambling losses as an itemized deduction. But your gambling expenses cannot be more than your total winnings reported in the tax return form. Terms and conditions apply for this.
• Keep Records: Keep a full record of your winnings and losses for your winning tax calculations. You should be able to prove those actual amounts with casino winnings tax receipts, tickets, invoices, or bank statements. For more information check out publications 529 and 525 of the internal revenue code.
• Signature: You must sign Form W-2G if you are the only winner subject to regular gambling withholding. The casino gambling website or brick-and-mortar property will give you copies of the W-2G form when you return the signed form to them.
• Avoid Online Gambling Tax Calculators: The actual tax amount that you owe or any deduction you may be entitled to depends on your personal circumstances (married, single, amount of win, state residence, and so on). No tax calculators available online will give you the right computation. Go after actionable tax knowledge, not a calculator.

For more information, read IRS Publication 529 on miscellaneous deductions or publication 525, on taxable and nontaxable income if you are confused about Gambling income and expenses. There are also instructions on form W-2G for casinos and players who win big or small.

?? USA Gambling Tax in a Nutshell

IRS is the government authority in the US to enforce the Internal Revenue Code. Topic 419 covers gambling income and losses. According to the tax topic 419:

• Gambling winnings are fully taxable in the US.
• You must report the income on your tax return.
• Gambling income includes winnings from lotteries, raffles, horse races, and casinos, among other things.
• Gambling income also includes cash winnings and the fair market value of prizes, such as cars and trips.

Do I have to pay tax on gambling winnings in the US?

Yes, including at online casinos or online betting sites. Gambling winnings are taxable in all states of the United States of America when it comes to federal taxes.

When it comes to individual states, some states require their residents to pay taxes on gambling winnings and some do not. States have their own rules about state taxes on gambling winnings. One state may use a flat percentage sum while another may compute the tax amount through a formula depending on the size of your gambling win.

States Without a State Gambling Tax

A few states including Nevada and Alaska do not have a state gambling tax. Check the list of states below.

• Washington
• South Dakota
• Alaska
• New Hampshire
• Wyoming
• Nevada
• Tennessee
• Florida
• Texas

Also check our state guide on gambling.

?? How Much Money Can You Win Gambling Without Paying Taxes?

IRS provides clear guidelines to gamblers in the US. Generally, if you win $600 or more in gambling winnings or jackpots, the casino is required to give you a Form W-2G to fill.

If you have won more than $5,000, the casino may be required to withhold 28% of the proceeds for Federal income tax. This blanket gambling tax rate also explains the taxes on a $5,000 lottery winning, for example.

If you did not provide your Social Security Number to the gambling company, the amount withheld by the gaming operator will be 31%.

If you are playing at an online casino and make a threshold win and trigger a W2-G, you can download the form by logging on to your account. The BetMGM Casino in Michigan, for example, mails out W2-Gs by January 31st and usually delivers them by the end of February. . BetMGM has to inform the IRS of these earnings made by players. US citizens and permanent residents simply add W2Gs to their tax filings only when there is tax withholding by the casino site. W-2G’s are consolidated by day and by State.

You need to report all gambling winnings as income on your tax return. Do you have to pay taxes on gambling winnings? Yes is the short answer for the tax rate on gambling winnings.

Gambling Income Definition for Tax Calculations

Gambling income includes, but is certainly not limited to, winnings from lotteries, raffles, horse and dog races, sportsbooks, and casinos, as well as the reasonable market value of prizes such as cars, houses, trips or other noncash prizes (including sweepstakes prize redemtions at existing or new sweeps casinos). If you are looking for taxes on gambling winnings calculator, do your own maths with your filled income tax return form.

All these are included (and the list is not exhaustive):

• Sports betting (online, mobile, app-based, or in a retail and physical sportsbook site)
• Sports Betting pools (such as “March Madness” pools online or offline)
• Daily Fantasy Sports (DFS)
• Horse or dog races (live and off-track betting; racinos)
• Lottery
• Sweepstakes or Social Casino winnings
• Raffles
• Game shows