1. But your tax bracket is only your MARGINAL tax rate. That is, only an additional $ of income is taxed at 25%. In the example you gave ('yearly income puts you in the 15% tax bracket after AGI) your regular income will only be taxed at 15% (some will actually only be taxed at 10%). Some of he gambling winnings will be taxed at 15% and some at 25%.
2. The news about taxes on gambling winnings doesn’t end there. The gambling institution is required to withhold 24% of your winnings as federal withholding tax, down from the previous 25% under the tax reform law. At tax time, you’ll receive Form W-2G for all reported winnings showing the amount you won and the taxes withheld.
3. So, if the winnings are reported through a W-2G Form, federal taxes will be withheld at a rate of 25%. If, however, you didn’t provide your Social Security number (or your Tax Identification Number), in that case the withholding will be 28%.

• What Rate Are Gambling Winnings Taxed At
• Gambling Winnings Taxed At What Rates

Gambling Winnings Subject to Tax?

Instead, gambling operators must pay taxes, and online gambling site operators must pay UK gambling tax duty. 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.

With all sports betting, casino, poker, daily fantasy, and state lotteries, is the government entitled to a fair share? The most accurate answer is, you can bet on it. While that fair share might cause you to grumble under your breath, the fact is gambling winnings are taxed.

Now, you might wonder if you can use your losses at the table or on the ballgame as a write-off. Here is a detailed guide that addresses all your questions about taxes on gambling. We’ll discuss how winnings are taxed, some state and federal requirements, plus which forms you need to use to report gambling income.

How Are Gambling Winnings Taxed

Answering the question about how gambling winnings are taxed involves looking at different situations. Of course, the guidelines for the federal income tax process are standard across the country.

States have various tax structures, so you need to inquire about those for the state in which you file your state taxes. Here is an overview of both federal and state guidelines for how gambling winnings are taxed.

The first thing to know is the difference in how you generated your winnings. If you win over $600 at the horse track, $1,200 on a slot machine or in a bingo game, $1,500at keno, or $5,000 or more at a poker table, you must report these winning to Uncle Sam.

For this reason, most tracks and casinos require your Social Security number before you’re paid out on any big cash win. You also must complete an IRS Form W2-G, and report the amount you won on this form.

You might immediately think this is all overkill because, in most instances, a casino is going to deduct 25% before they pay out your winnings. You’ll get a receipt, of course, since these monies will be earmarked for the US Government Treasury.

Now, what if you win an amount of money gambling that is less than those previously listed? According to the IRS, you are legally obligated to report these winnings as income on your federal taxes.

To be on the safe side, always report the money you win gambling, whether it’s on a horse, a puppy, a spill out from a slot machine, or big pot when you’re holding a royal flush. Gambling income is taxed federally.

Many states with an income tax will also require you to report winnings, especially those where casinos and sportsbooks are becoming legal. Of special note, the only state for years where casino gambling was legal, Nevada, did not tax gambling income. Check with your state to determine whether you need to report your winnings.

There are often questions about how any money you win gambling online can be taxed. Online gambling taxes do have a few gray areas. Many of the current gambling venues are striving to offer online sportsbooks, so this type of gambling and how taxes apply is important.

What the IRS does is specify what is taxable and what is non-taxable income. In the world of daily fantasy sports, there are players who essentially earn their living by playing DFS contests. In these instances, you should take precautionary steps when it comes to taxes and your winnings.

Same concept will apply if you are in a state that eventually allows online sports betting through a sportsbook. IRS Publication 525 explains in detail what constitutes taxable and what is deemed non-taxable income.

Gambling Winnings will rarely fall under the category of non-taxable, so be prepared to treat online winnings from any type of gambling in the same manner you handle any money you win at a physical casino or sportsbook.

But, How Will They Know I Won?

One of the huge motivating factors behind states’ eagerness to legalize sports betting is the lucrative potential of such operations. Every state that allows casino gambling, or promotes a statewide lottery, has these same financial aspirations.

To risk that the IRS or state government won’t find out about your gambling profits is taking a gamble bigger than the risk you take to bet in the first place. Obviously, the state is going to know about every ticket that wins in their own lottery. Be confident that the federal government is going to get word of those winners as well.

When it comes to gambling, each state has some form of a gaming commission that oversees all operations. One of the stipulations to get a licensed casino is that all winners will be reported. To think that you might somehow circumvent this reporting process is naive.

What Rate Are Gambling Winnings Taxed At

If you do ignore gambling winnings when filing your taxes, you could be pursued for tax evasion. The consequences of being found guilty of tax evasion for failure to report gambling or lottery winnings is the same as if you attempted to evade paying taxes on any other earned income.

Report your winnings, because you won’t like the consequences of not reporting them. Casual gamblers can get by with a few receipts. One disadvantage of keeping limited records will befall you if you get lucky and win big.

Without strong receipts for previous losses, you will be unable to document these as deductions to offset the taxes leveled against your winnings. For anyone who takes pleasure in gambling frequently, keep your receipts and maintain at least a basic ledger of your gambling activity.

You don’t need to account for every nickel pumped into every slot machine, but documentation of total wins and losses will prove helpful when submitting your tax documents. Here are two of the basic IRS forms used to report winnings from gambling, including the standard personal income tax form.

• U.S. Individual Tax Return 1040
• IRS Form W-G2 Certain Gambling Winnings

Maintaining good records of your gambling activity will allow you to itemize your losses and deduct them from your final tax bill. However, you can also apply the same tax withholding structure for your gambling winnings that you apply to other types of income.

The income tax rate is 24% on all types of gambling profits, but there are certain sources of these winnings that are automatically subject to withholding tax. Follow the IRS guidelines to have a preset percentage taken out of your winnings.

This will not only help you avoid mistakes due to lapse in memory but can also eliminate being hit with a huge tax number at the end of the year. Here are some more frequently asked questions about gambling winnings and paying taxes on them.

Frequently Asked Questions About Gambling Winnings and Taxes

Here are some frequently asked questions in relation to gambling winnings and taxes.

1. Are you required to pay taxes if you win gambling at a physical casino?

The short answer is yes. A lengthier explanation simply involves the previous example discussed in how gambling winners are taxed. The law specifies that you must report all income from gambling games of all types.

Gambling Winnings Taxed At What Rates

While the guidelines on when that income becomes taxable are different for various games, the rules read that you must report all winnings. That will include any money you win at a physical casino, including an online sportsbook. Remember, you can always counter winnings by reporting losses as well. Keep your records organized.

2. Do you have to pay taxes on the money you win gambling online?

Again, the blunt answer is yes. Since the federal government, and many state governments for that matter, deem winnings from lotteries or gambling to be more than just good fortune. They are income that you generated by actively trying to obtain that money.

The IRS doesn’t care that you open up your handheld device to play a slot machine trying to dispense some extra change in your account. If the online slot machine produces a winner, they want their cut.

3. Do you owe taxes if you win playing daily fantasy sports games?

Not to sound redundant, but the answer again is yes. Be mindful, that to comply with federal law, daily fantasy sports providers are going to document your winnings. Any attempt to try to evade paying taxes on DFS winnings might land you in hot water with the IRS.

As with all other types of gambling, report your DFS winnings as well. DFS websites such as DraftKings and Fanduel will report winnings, especially big-ticket tournament winners. Again, federal law mandates reporting all income, including DFS prizes. Check with your state government for reporting requirements there.

4. Do you have to pay taxes on gambling winnings even if you’re not a resident of the United States?

While this question involves a little wider degree of supposition, the answer is still an emphatic yes. Even nonresidents who win at casinos or with a winning lottery ticket must pay a percentage to the federal government. Nonresidents who win at a casino must complete and submit IRS Form 1040NR.

5. Can gambling losses be written off on your tax return?

The first step is to report some amount of winnings from your gambling. This is why a ledger of your gambling activity can be useful. Once you acknowledge your winnings, you can itemize deductions for all your losses as well.

6. Do you still owe taxes if you leave all your deposits and winnings in your account?

Just because you do not make any withdrawals during a tax year, that does not negate the fact that you won. If you won money gambling during the tax year, it is a wise decision to record these winnings, and then report them according to the guidelines mentioned.

7. Are team or group gambling bets still taxed?

The same tax system that is applied to individual winnings earned from gambling, applies to any money you may win as part of a betting team. If you bet using the team concept, it is recommended you keep detailed records. The consequence is to be hit with a tax for the entire cash payout when you actually only received a percentage.

8. When you’re retired, do you still need to report winnings from gambling?

A large percentage of the casino gambling community is retired persons. You may think that since you’re retired, or on some form of fixed income, that you may not need to pay taxes on any money you win.

In all honesty, you can even be hit with a tax for winning a big bingo jackpot. If you’re retired, reporting gambling winnings can be even more important. By not reporting your gambling winnings, you can create a number of headaches for yourself.

You can be bumped into a different tax bracket, or have your medical coverage and premiums changed because of unreported income from winning at the poker table. Be dutiful with your gambling activity, especially if you’re enjoying your retirement years.

These are the basic principles of how gambling winnings are taxed. The most important principle to follow is to always report your winnings. When the alternative is to get hit with a surprise tax bill, honest consistency is the best policy.

Maintaining good records is also a worthy suggestion. Receipts can be used to itemize and deduct losses, plus you’ll know in advance how much tax you will owe on any winnings. While it might seem frivolous to keep records if you only gamble occasionally, there is always that possibility you hit a big cash jackpot.

When you gamble, you’re probably only focused on winning in the moment. You don’t think about what the government might take off the top of your wins.

Of course, the US federal government always wants a cut. It demands 24% of your winnings through federal taxes.

However, states vary on how they tax gambling income. Some are much worse than others due to their high rates.

Casino Gambling Taxes by State

The following guide covers seven states that want a big chunk of your winnings. It also discusses common questions and topics regarding gambling and taxes.

California:

The California casino scene is a thriving land-based gambling industry. It offers 62 tribal casinos, 88 card rooms, and over a dozen horse tracks.

That said, California is definitely a good vacation spot due to its weather and numerous gaming options. But you might take pause on visiting here when considering the extreme tax rate.

California taxes gambling wins as normal income. It collects anywhere from 1% to 13.3% of your winnings. The 13.3% is the highest state tax rate in the US.

Iowa:

Iowa boasts casinos, poker rooms, and sports betting. It charges a 5% flat tax on winnings earned in the Hawkeye State.

Minnesota:

Minnesota offers a wide range of charity gambling establishments and a lottery. The Gopher State may not provide massive Vegas-style resorts, but it does give you some options.

It taxes gambling according to four income brackets (based on married people’s income):

1. 35% ($0 to $39,410 annually)
2. 05% ($39,410 to $156,570)
3. 85% ($156,760 to $273,470)
4. 85% ($273,470 and above)

You’ll likely fall into the 5.35% bracket if you do profit through gambling. But if you win really big, you’ll need to deal with the large 9.85% rate.

New York:

Gambling in New York has grown within the past decade. Its Expanded Gaming Act has added commercial casinos on top of the existing tribal establishments.

You can also enjoy lotteries and poker here too. Assuming you win, though, then you must ante up between 4% and 8.82% for state taxes.

Oregon:

The Beaver State offers lotteries, charity gaming, horse racing, and tribal casinos. It provides more than enough gambling options for its 4.22 million residents.

Oregon doesn’t worry about taxing wins worth less than $600. However, it does impose an 8% tax on winnings worth over $600.

Vermont:

Vermont features a unique tax structure that varies based on your winnings. You’ll pay a 6.72% rate on wins worth less than $5,000, and 6% on wins worth over $5,000.

Wisconsin:

Wisconsin features 22 tribal casinos and lotteries. The Cheese State requires up to 7.65% in taxes on gambling winnings.

Should You Avoid States With High Gambling Taxes?

You don’t necessarily need to avoid states with high gambling taxes—especially when you’re interested in a certain casino or sportsbook. However, you should keep this matter in the back of your mind.

Of course, you also want to take other factors into account besides taxes. Here are aspects to think about when determining what state you’ll gamble in:

• Convenience/distance – You don’t want to drive for hours just to avoid gambling taxes.
• Quality of gambling venues – Playing at the best casinos/poker rooms/sportsbooks can make dealing with high stakes worthwhile.
• Availability of regulated online gambling – You may be focused on using legal online casinos and betting sites above all.
• Your preferred stakes – You probably don’t need to worry much about higher taxes if you’re just playing quarter slots or $5 blackjack.

What If You Don’t Live in the State Where You Win?

Gambling over state lines causes confusion on where to pay taxes. Do you pay your home state or the one where you win?

Typically, you cover taxes in the state where the winnings occur. Your home state, meanwhile, will give you a tax credit for whatever is paid to the other state.

Here’s an example:

• You live in Oregon near the California border.
• You cross the border and buy a lottery ticket at a CA gas station.
• You win a $1 million prize.
• As per California’s tax laws, the $1 million payout is subject to the highest 13.3% rate.
• You pay $133,000 to the Golden State.
• Oregon only features an 8% tax rate on large gambling wins.
• Therefore, you owe nothing to the Beaver State.

Don’t Forget Federal Taxes

Some states don’t require you to pay any taxes on gambling winnings. These states include:

• Alaska
• Delaware
• Florida
• Nevada
• New Hampshire

• South Dakota
• Texas
• Washington
• Wyoming

You must pay federal taxes on wins no matter what—even if you live in a state with no gambling taxes. Again, Uncle Sam wants 24% of your winnings.

This percentage is already significant. It becomes even more noteworthy in a state like California, where you could pay up to a 37.3% total tax (24 + 13.3).

You report gambling wins under the “other income” on Form 1040. The government expects you to report winnings even if you earn just $1.

Of course, you can almost assuredly get away without reporting a tiny payout. However, a gambling establishment requires you to fill out a W-2G form on big prizes.

Casinos, poker venues, and sportsbook issue W-2G’s under the following circumstances:

• $600 and above for horse gambling and sports betting wins worth 300x your stake (e.g. $3,000 win / $10 bet = 300x).
• $1,200 and above for slots and video poker wins.
• $1,500 and above for keno wins.
• $5,000 and above for poker-tournament wins.

Remember to Deduct Your Casino Losses

The IRS wants you to report all gambling winnings under any circumstance. State governments that tax gambling payouts expect the same.

However, you can deduct any losses incurred as well. You itemize deductions in a different section of your tax form than where the other income is reported.

Your deduction will be subtracted from whatever you win. Here’s an example:

• You win $4,000 at a casino.
• You lose $3,000 while winning this amount.
• You must report the full $4,000 under “other income.”
• The $3,000 goes under itemized deductions.
• $4,000 – $3,000 = $1,000.
• You’d pay the relevant tax rate on $1k.

More on Itemized Deductions

Itemized deductions constitute expenses that you spend to win money. They differ from a standard deduction, which is basically a lumpsum that’s subtracted from your income.

Standard deductions are easier to deal with. Unfortunately, you must use the itemized variety when concerning gambling.

If you’re an amateur gambler, meals, hotel stays, entertaining, and gas/plane tickets don’t count as deductions. You must be a professional gambler to deduct items like these. Instead, you can only count what you spend on gambling.

Keep Casino Gambling Records

You should keep track of your gambling winnings and casino bankroll as best you can. This way, you have evidence just in case the IRS audits you.

When keeping records, you want plenty of information. Here’s an example of five important things you can jot down in your records:

1. Type of gambling/game
2. Date of gambling session
3. Location of the sportsbook/poker room/casino
4. Bankroll at the start of the session
5. Bankroll at the end of the session

In addition to tracking this info, you should also hold onto other documents that you receive. Bank statements, betting tickets, check copies, and W-2G forms are examples of documentation.

What If You Don’t Pay Taxes on Gambling Winnings?

You may be tempted to avoid reporting winnings from gambling—especially if the money is insignificant. You’ll likely get away with doing so provided you haven’t won big enough to receive a W-2G form.

Of course, I don’t advise failing to report gambling winnings. But you definitely don’t want to avoid reporting wins after receiving a W-2G.

A gambling establishment sends a W-2G copy to the IRS. The latter can easily check this information with their software.

If the IRS catches you not reporting taxes, they’ll probably just send a letter and fine you. However, they can take further action if you refuse to cover the taxes.

Conclusion

Claiming gambling winnings on your taxes varies greatly from one state to the next. Some don’t charge you a dime while others level a large amount.

Of course, you may not really care about the state tax beforehand. If you do win, though, you’ll feel the sting in a state with a high tax rate.

You don’t necessarily need to drive hours away just to avoid high taxes on winnings. However, you might consider taxes if you live near the border of two or more states.

California, Minnesota, New York, Oregon, and Wisconsin are currently the five places with the highest rates. If possible, you should avoid these states when gambling for mid or high stakes.