When You Hit the Jackpot, So Does the IRS
The tax implications when you win and lose at gambling
By Benjy Schirm, J.D. | Reviewed by Canaan Suitt, J.D. | Last updated on August 14, 2024Use these links to jump to different sections:
- Reporting Requirements for Gambling Winnings
- Tax Withholding Rates for Gambling Winnings
- Winnings from Table Games
- Claiming Gambling Losses as Tax Deductions
- Find Experienced Legal Help
Hitting it big at a casino to ride off into the sunset with stacks of cash is a fairly common dream. And like many dreams, it’s largely rooted in fantasy. But if you plan to try your luck, before imagining your new home or yacht, consider the tax implications if you hit it big.
Reporting Requirements for Gambling Winnings
The Internal Revenue Service (IRS) requires casinos to report federal taxes if your winnings are over certain thresholds:
- $600 or more on sweepstakes, lottery winnings, or wagering pools if the winnings are at least 300 times your wager amount (if the winnings minus wager exceed $5,000, the payer must withold at a tax rate of 24 percent);
- $1,200 or more on bingo and slot machines;
- $1,500 or more on keno;
- $5,000 or more on poker tournaments.
When you exceed these amounts, the casino may withhold taxes and will provide you with IRS Form W-2G. Be certain to report—and take credit for the tax you paid—on your IRS Form 1040 tax return at the end of the tax year.
Tax Withholding Rates for Gambling Winnings
The percentage withheld ranges between 24 and approximately 31 percent. If a winner refuses to provide a Social Security Number, the casino is required by the IRS to withhold 24 percent of the payout as income tax (formerly, this rate was 28 percent). At times, it may be casino policy to withhold taxes whether or not people provide any information. The withholding tax is 30 percent if it involves a foreign gambler.
Winnings from Table Games
The rules are different for table games like blackjack, baccarat, craps, roulette, or other spinning wheel games. Taxable events are determined by one’s gains through any transaction, but since casinos don’t know the amount you started with in these games, they cannot determine how much you won. As a result, federal law provides that there is no withholding or even reporting of table game wins to the IRS.
The best taxpayer practice would be to declare your winnings in your personal taxes as you walk away from the table with any substantial amount.
Claiming Gambling Losses as Tax Deductions
To every negative there is also a positive when it comes to taxes. You may have to pay taxes on gambling income, but you can also claim gambling losses as an itemized deduction. So, while the government may take from your winnings, you may offset some of your other tax burdens by claiming your losses at the casinos.
To do this, you must keep documentation to substantiate the amount and nature of the losses. While this may sound like an answer to all gambling woes, it can only go so far. In any event, you cannot claim gambling losses that exceed your winnings.
Find Experienced Legal Help
To be certain, if you are planning on betting a substantial amount of income, document everything, no matter how bad or wonderful the outcomes may be. And if it becomes a part of your life, be certain to contact a CPA or reputable tax attorney to advantage yourself with ever-changing codes when tax time roles around. For more information, learn about the expanded legalization of sports betting, or see our tax law overview.
What do I do next?
Enter your location below to get connected with a qualified attorney today.Additional Personal Taxes articles
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