gambling dice

Every year, around 40% of American adults visit one of the casinos in Las Vegas, Nevada, Atlantic City, New Jersey, or one of the thousands of land-based U.S Casinos, not to mention playing casino games on online casinos. A lucky few go home with large sums of money.

Taxes on Gambling Winnings in the USA

Winnings in the United States from gambling are taxable – therefore if you win a large sum of money when gambling it’s unlikely that you will be able to keep every cent. The U.S Internal Revenue Service (IRS) has mechanisms in place to ensure that it is informed of gambling wins over a certain amount so that it receives its fair share.

Taxes on gambling don’t just apply to winnings from gambling in casinos: Horse races, off-track betting, sweepstakes, lotteries and even game-shows winnings are taxable in the United States.

Non resident visitors to US casinos are often surprised to find out that they face a 30% withholding tax on their casino winnings.

Gambling Loss Deductions

You can deduct gambling losses from taxes due if you itemize your deductions. However, you can only deduct them up to the total amount that your winnings offset – and you must be able to prove it with official documents your profits and losses.

US Gambling Taxes: Key Takeaways

  • If your winnings in a gambling venue totals over a certain amount, the payer will deduct 24% from your winnings before payout.
  • When you file your annual tax return with the IRS, you will document your winnings and your related tax payments. IT may be that case that you will need to pay additional gambling taxes, or get a rebate of some of your money back, depending on your specific tax rate.
  • Gambling losses may be deducted, but only up to the sum of the total amount of winnings that you report.
  • Gambling generally has a negative expected value (EV) — meaning the the house always has the advantage (unless you’re playing a skill-game against other players – e.g. poker).

Taxation of Gambling Winnings in the U.S

To avoid run-ins with the IRS, it’s important to grasp the tax law as it applies to gambling before heading on a gambling trip to Las Vegas
If you win a large sum of money in a lawfully regulated game of chance, the person who pays you will deduct 24% of your earnings for taxes and send you a copy of IRS Form W-G2 to record the transaction.

In gaming, what constitutes “a significant amount of money”? It is determined by the particular game:

  • Winnings at slot machines or bingo games must be at least $1,200
  • Keno must be at least $1,500.
  • Sweepstakes, wagering pools, and lotteries are all limited at $5,000.

In any event, 24 % of your winnings will be taken from your reward and submitted straight to the IRS, along with Form W-G2. This is an estimated tax of 24 percent.

You may receive part of it back, or you may owe more.

Note: Taxes on games which are deemed “skill games” like craps & blackjack are not immediately withheld by the payer – but you still are legally obliged to report the income and pay gambling taxes on it.

Gambling Taxes: Exceptions – Skill Games Vs Games of Chance

In the eyes of the IRS Slot machines are considered to be games of chance, whilst table games are considered to be games of skill.

Casinos are not obligated to withhold taxes or issue W2-Gs to players who win substantial sums at table games such as blackjack, craps, or roulette, which are all classified as skill games rather than chance games (a casino cannot be certain how much money you started with when you cash in your chips from a table game).

This does not relieve you of your responsibility to declare your winnings to the IRS. You simply do it when you file your taxes for the year, rather than when you claim your wins at the casino. Also, keep detailed records of all of your gambling activity, including losses and earnings. You may be able to avoid paying taxes for example if you spent $2,000 on lottery tickets to win $2,000.

Winnings from gambling must be reported

When you file your taxes for the year in which you received a gambling payout, you’ll report it under “Other Income” on Form 1040.2, along with any taxes you’ve previously paid.

Keep in mind that the 24% you previously paid was an estimate. The actual amount you owe (or will be repaid) is determined by your entire year income.

Currently, there are seven tax brackets. To owe more taxes on your winnings in the 2021 tax year, you’d have to have an individual income of more than $164,925 (including your winnings). If your total income was less than $86,376, you may be eligible for a refund. 8

Do Casinos Have to Report Gambling Winnings to the IRS?

Yes, however specific thresholds must be met before a casino is required to declare winnings.

The amount of gambling earnings that must be reported to the IRS varies depending on the game.

  • Winnings at a horse racetrack that surpass $600 or 300 x your initial bet must be disclosed.
  • All winnings above $1,200 on slots and bingo must be reported.
  • The threshold for reporting income from a poker tournament win is $5,000.

Taxes for Professional Gamblers

If you make all of your income from gambling games like poker or blackjack – and gambling is your career – your revenues are usually considered regular earned income and taxed at the taxpayer’s standard effective income tax rate.

As a self-employed person, you must keep track of your earnings and expenses on Schedule C.1011.

Foreigners / Non-Residents – Gambling Income Tax Requirements

Visitors to the he United States must report gambling profits on Form 1040NR, according to the IRS. In most cases, such income is taxed at a flat rate of 30%.

In most cases, nonresident aliens are unable to deduct gambling losses in the U.S, with the exception of Canada (both countries have a mutual have a tax treaty in place which permits citizens of Canada to deduct their gambling losses up to the amount of their gains).

Is it possible to deduct gambling losses?

For tax purposes, you can deduct any money you lose gambling from your earnings.

Gambling losses that exceed your winnings, on the other hand, may not be claimed as a tax deduction. There is no silver lining in the form of lower tax liability when you lose your shirt in Vegas.

Do States Charge Taxes on Gambling Winnings?

In some states, gambling winners must declare their winnings in the state where they were won. Regardless of where you live, most states tax all income produced in their state.

Furthermore, your resident state will compel you to disclose the wins while giving you a credit or deduction for taxes paid to a non-resident state.