Do I Have to Pay Tax on Casino Winnings in the US?

Introduction: Do I Have to Pay Tax on Casino Winnings in the US?

In the US, it’s state laws that are used to oversee the gambling industry. And those laws differ from state to state. On the whole, most of this legislation is geared towards promoting sensible and responsible gambling. Depending on the state which you’re playing in, then it’ll be the states themselves that deduct any taxes from your winnings. To that end, every player must be aware of their legal responsibilities when they sit at the casino games table and start to gamble. If you’re gambling online, for example at King Billy Casino, then those winnings will also fall under your legal responsibility. Below you’ll find a comprehensive guide with regards to tax and your casino winnings.

Tax and Casino Winnings in the US

All casino returns are fully taxed in the US. This can be at both Federal and state levels. The IRS is looking at returns on cash and non-cash wins. So before you even think about placing that bet, make sure you’re ahead of the curve when it comes down to your tax obligations. No one wants that type of surprise. All guides to win the jackpot should include a section on taxes. You need to know about how to report your casino earnings, how to keep records, sharing your gambling returns, and the different methods that can be used to collect the taxes owed.

How Casino Winnings Are Taxed

Cash winnings are the returns you get by playing the lotto, keno, raffles, sweepstake’s, table games, and slots. Non-cash winnings are things like prizes, which could include holiday trips and vehicles. For this latter category, the Fair Market Value (FMV) is used. If you have all your deductions itemised, then you can deduct your betting losses from Schedule A. But keep in mind that these can only be deducted for up to the reported gambling winnings amount. For this, you’ll need the following:

The correct records of all your betting losses and returns.
A verifiable gambling activity report.

If any of the numbers are appropriate to you from the list below, then you’ll need to communicate with the IRS using Form W2-G:

• $600 or more if your return is 300 (or more) times your wager.
• $1200 or more from returns gotten at bingo games or slots.
• $1500 or more from returns obtained from Keno games.
• $5000 or more from returns earned at poker tournaments.

All the above returns are subject to federal income tax withholding requirements. You’ll have to enclose your Social Security Number, along with your reporting Form W2-G when to deal with the IRS. The rate of tax is usually 25%. Just to make matters slightly more complicated, submitting via Form W2-G is not required for all betting returns. For example, this form does not apply for returns from blackjack, craps, roulette, baccarat, and any other table games like jackpot poker. Though you don’t have to fill in your table game returns on the W2-G Form, be aware that this doesn’t absolve you of having to declare and pay taxes on those games. We take a more in-depth look at taxes on slot machine winnings in another article.

How to Report Casino Winnings

It’s a given that your annual tax return must include all of your casino winnings, including those won online at King Billy Casino. Essentially, this is to stop there from being any sort of mix up at the IRS, as your gambling income is part of your total income. Non-cash winnings are reported as other income and they’ll be taxed using the FMV. No matter how small your winnings, the law is strict in that you must report them. All of them! That doesn’t mean that you’ll have to pay tax on all of them. Provided that you have itemised your losses then you can claim those against your winnings.

Betting taxes are not progressive. This means that you pay the same amount whether you won $1,000 or $100,000 as a percentage. In many cases, a tax of 25% is already deducted by the casino before you get paid out. When you cash out at the casino, they will require your tax number. Failure to provide it will mean that they can hold back a larger share of 28%. This casino withholding comes into play if your winnings minus your initial bet comes to more than $5,000 or a minimum of 300 x your bet.

If you happen to be a professional gambler, then your income gets reported on a Schedule C.

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Reporting Your Betting Losses

For tax purposes, all gambling losses will need to be reported. This means that you can deduct those losses from your overall tax bill by the IRS. Your winnings, losses, and other itemised deductions go onto Form 1040, Schedule A. We suggest that you report your losses as separate from your winnings as opposed to providing a new amount. Your losses can only be offset against your reported betting winnings, but you can’t deduct them all. So, if your betting return states $10,000, with $10,500 in losses, then you can only deduct $10,000 of those losses. By the way, there’s a list of “standard deductions” and if your itemised deductions fail to exceed it, then you’ll not be enjoying all the benefits. These deductions include things like your medical bills, your mortgage, and donations.

Tax Deduction on Illegal Gambling

Yes, you read that right…you can get tax deductions from illegal gaming! More than $150 billion is spent on illegal gambling in the US. Because sports gambling is prohibited in some states but allowed in others like Oregon, Montana, and Nevada, this has made winnings from illegal gambling tax-deductible.

Keeping Up to Date Gambling Records

It’s a requirement of the IRS, that you hang onto all records of your wagers, returns, and losses. Other information that applies to gambling including gambling slips, checks, payment slips, receipts, and or winning statements from individual bookmakers, is also required to be kept. Essentially, this is proof of your deductions. The same applies to playing online. If you’re taking a punt at King Billy Casino, then you’ll still need to keep all records of your gambling activity.

For every loss or win, you need to keep the following:

• Betting activity type
• Names of persons available during betting activities
• Winnings and losses amount
• The date of the loss or win
• The name and address of the bookmaker

Yet More Gambling Records

You should also keep the following information to help aid any deductions you might require:

Slot Machines

• A documentation of the playing time, winning dates, and machine number of all the jackpot slots played.

Lotteries

• Records of lottery winning, losses, dates, payment slips, winning statements as well as purchased and un-redeemed tickets.

Bingo

• You need to provide documentation of the amount collected on winning tickets, the cost of purchased tickets, the number of bingo games played, and any receipt from the casino.

• 

Keno

• Copies of your casino check cashing records and casino credit files. Copies of purchased Keno tickets that have been verified by the casino.

Table Games

• All records of the payer’s credit card data specifying how the credit was issued along with the number of the table used in playing. The table games in this category include baccarat, blackjack, poker, craps, wheel of fortune, and roulette.

Racing Games

• A record of the number of wagers placed, races, winning tickets amounts, losing tickets amounts as well as un-redeemed tickets and payment records. The racing games include dog racing, harness, and horse racing.

Conclusion: Do I Have to Pay Tax on Casino Winnings in the US?

If you’re serious about playing, then you’ll need to be serious about your tax obligations. We strongly suggest that you do nothing to encourage the IRS to come looking for you Be proactive with all your tax affairs. After you visit casinos to win the jackpot, you might be surprised at the amount of cash you can deduct.

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