Can Gambling Winnings Be Taxed
Gamblers understand the concept of win some, lose some. But the IRS? It prefers exact numbers. Specifically, your tax return should reflect your total year’s gambling winnings – from the big blackjack score to the smaller fantasy football payout. That’s because you’re required to report each stroke of luck as taxable income — big or small, buddy or casino.
Whether it's $5 or $5,000, from an office pool or from a casino, all gambling winnings must be reported on your tax return as 'other income' on Schedule 1 (Form 1040), line 8. If you win a non-cash. You must report all your winnings. Depending on how much you won during the year, you may. Image: Casino.org American Tax Season Is Here. The US uses a flat 25% tax rate on all gambling winnings. Taxes are applied to all gambling, including sweepstakes and other prizes. Furthermore, in addition to paying federal taxes on gambling winnings, you may be required to pay state taxes as well. Each state has its own distinct set of rules for taxing gambling winnings, so.
If you itemize your deductions, you can offset your winnings by writing off your gambling losses.
It may sound complicated, but TaxAct will walk you through the entire process, start to finish. That way, you leave nothing on the table.
How much can I deduct in gambling losses?
You can report as much as you lost in 2019 , but you cannot deduct more than you won. And you can only do this if you’re itemizing your deductions. If you’re taking the standard deduction, you aren’t eligible to deduct your gambling losses on your tax return, but you are still required to report all of your winnings.
Where do I file this on my tax forms?
Let’s say you took two trips to Vegas this year. In Trip A, you won $6,000 in poker. In the Trip B, you lost $8,000. You must list each individually, with the winnings noted on your return as taxable income and the loss as an itemized deduction in Schedule A. In this instance, you won’t owe tax on your winnings because your total loss is greater than your total win by $2,000. However, you do not get to deduct that net $2,000 loss, only the first $6,000.
Now, let’s flip those numbers. Say in Trip A, you won $8,000 in poker. In Trip B, you lost $6,000. You’ll report the $8,000 win on your return, the $6,000 loss deduction on Schedule A, and still owe taxes on the remaining $2,000 of your winnings.
What’s a W-2G? And should I have one?
A W-2G is an official withholding document; it’s typically issued by a casino or other professional gaming organization. You may receive a W-2G onsite when your payout is issued. Or, you may receive one in the mail after the fact. Gaming centers must issue W-2Gs by January 31. When they send yours, they also shoot a copy to the IRS, so don’t roll the dice: report those winnings as taxable income.
Don’t expect to get a W-2G for the $6 you won playing the Judge Judy slot machine. Withholding documents are triggered by amount of win and type of game played.
Expect to receive a W-2G tax form if you won:
- $1,200 or more on slots or bingo
- $1,500 or more on keno
- $5,000 or more in poker
- $600 or more on other games, but only if the payout is at least 300 times your wager
Tip: Withholding only applies to your net winnings, which is your payout minus your initial wager.
What kinds of records should I keep?
Keep a journal with lists, including: each place you’ve gambled; the day and time; who was with you; and how much you bet, won, and lost. You should also keep receipts, payout slips, wagering tickets, bank withdrawal records, and statements of actual winnings. You may also write off travel expenses associated with loss, so hang on to airfare receipts.
Use TaxAct to file your gambling wins and losses. We’ll help you find every advantage you’re owed – guaranteed.
More to explore:
We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.
Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.
Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.
This article was fact-checked by our editors and Jennifer Samuel, senior product specialist for Credit Karma Tax®.
Gambling may just be a hobby to you, but there’s nothing casual about it when it comes to filing your federal income taxes.
Nearly two-thirds of Americans gamble, according to a 2016 Gallup poll. And while you might think that winning a few bucks from a scratch ticket or a weekend trip to Vegas isn’t a big deal, the government considers every dollar you win from gambling as taxable income.
As a result, it’s important to understand how to report your gambling winnings, what to include and how you can use your losses in your favor. Here are some things you should know about how gambling winnings are taxed.
1. You must report all your winnings
Depending on how much you won during the year, you may receive a Form W-2G listing your gambling winnings. But even if you don’t receive the form, you’re still required to report all your winnings as “other income” on your tax return.
“All cash and non-cash gambling winnings are taxable and should be reported as ‘other income,’ ” says Patrick Leddy, partner at Farmand, Farmand & Farmand LLP. This includes any winnings you received from casinos, lotteries, raffles or horse races. Non-cash winnings, such as prizes like cars or trips, are also considered taxable income and are taxed based on their fair market value.
To make sure you keep track of both your winnings and losses, record the following details every time you gamble:
- The date and type of your gamble or gambling activity
- The name and location of the gambling establishment
- Names of other people who were with you, if applicable
- How much you won or lost
- Related receipts, bank statements and payment slips
2. You can deduct some losses
No one likes to talk about how much money they lost gambling. But when it comes to your tax return, being honest can save you money. That’s because the IRS allows you to deduct gambling losses.
Though you may not be able to deduct all your losses.
“Taxpayers can deduct gambling losses only up to the amount of their gambling winnings,” says Leddy, “and only if they itemize their deductions.”
For example, if your gambling winnings totaled $5,000 in the tax year, but you lost $6,000, you can only deduct $5,000 of those losses. Keep in mind, itemizing your deductions may not afford you the maximum tax benefit. If your total itemized deductions — which can also include charitable donations, home mortgage interest and medical expenses — don’t exceed your standard deduction, itemizing might not be the optimum choice for you.
Can I deduct the cost of a gambling addiction recovery program?
IRS Publication 502 lists alcohol and drug-related addiction-recovery programs as eligible for the medical expense deduction. However, gambling addiction isn’t included. If you need help dealing with a gambling addiction, you can call the Substance Abuse and Mental Health Service Administration’s 24/7, 365-days-a-year hotline at 1-800-662-4357.
3. Even illegal gambling winnings are taxable
According to the American Gaming Association, it’s estimated that Americans spend more than $150 billion per year on illegal U.S. sports betting — and yes, that can include your office March Madness pool.
A May 2018 U.S. Supreme Court ruling opened the door for states to legalize sports betting, but not all have done so. That said, any winnings you receive from betting on sports legally or illegally (or from any illegal activity, for that matter) are still taxable.
Learn more about sports betting and taxes
Bottom line
So how are gambling winnings taxed? Every dollar you win from gambling, whether legally or not, is considered taxable income. As a result, it’s critical that you keep a record of your winnings so that you can report them accurately. You’ll also want to keep track of your losses so that you can use them to qualify for a tax break.
Once you’re ready to file your taxes, Credit Karma Tax® can help show you where to include both your winnings and your losses so that you can maximize your tax refund if you’re owed one.
Paying Taxes On Gambling Winnings
Jennifer Samuel, senior tax product specialist for Credit Karma Tax®, has more than a decade of experience in the tax preparation industry, including work as a tax analyst and tax preparation professional. She holds a bachelor’s degree in accounting from Saint Leo University. You can find her on LinkedIn.