What could be better than betting on a long shot at the race track, going to Vegas and pulling the slots, or playing money bingo and winning a big cash prize? Ask anyone who’s had it happen to them and they will tell you that there is absolutely nothing in the world like the feeling you get when you gamble and win. However, the taxes are another story.
What could be better than betting on a long shot at the race track, going to Vegas and pulling the slots, or playing money bingo and winning a big cash prize? Ask anyone who’s had it happen to them and they will tell you that there is absolutely nothing in the world like the feeling you get when you gamble and win. However, the taxes are another story.
The following rules apply to casual gamblers who aren't in the trade or business of gambling. Gambling winnings are fully taxable and you must report the income on your tax return. Gambling income includes but isn't limited to winnings from lotteries, raffles, horse races, and casinos.
Report Gambling Winnings
It doesn’t matter if you went to Vegas or Reno and hit it big, or play bingo games at the local bingo hall, what you win is considered taxable income in the eyes of the Internal Revenue Service (IRS). It doesn’t matter if you won cash, a door prize, or a big-ticket item like a car. Uncle Sam wants a slice of your pie and if you don’t pay him, you could find yourself in a bit of trouble.
For many of us, gambling means buying the occasional lottery ticket on the way home from work, but the Internal Revenue Service says that casual gambling also includes raffles, casino games, poker, sports betting—and, yes, even fantasy football. When you win, your winnings are taxable income, subject to its own tax rules. After all laws are to abide and the huge winnings at online casinos and game plays if end up in receiving a specific tax form might be a good cause for some well being of our country and people. So even if you don’t receive a W-2G or other documentation from the casino or gambling establishment, you are still required to file those wins. This article covers taxes on gambling in the US for U.S. Citizens plus the legality of betting sports online (spoiler alert: in most states, it’s perfectly legal). Paying taxes on any sports betting winnings is.
Before You Gamble, Know the Applicable Tax Policies
Technically, any gambling winnings count as taxable income. If what you win is considerable enough, you are required to fill out IRS Form W-2G.This form gets filed along with your federal income tax return at the end of the year. Gambling winnings may come from one of the following:
- Slot machines
- Betting pools
- Keno
- Poker tournaments
- Pool Tournaments
- Casino games
- Lottery winnings from scratch-off, pull-tab or machine generated tickets
- Sweepstakes
- Horse or dog races
- Raffles
- Game shows
- Off-track betting
- Winnings via a Sports Book
- Bingo games played in a brick and mortar bingo hall or an online casino
The start at which gambling winnings must be reported to the IRS can vary, depending on the type of game. For gambling winnings from scratch-off or machine lottery prizes, or horse and dog track bets, payouts begin at amounts greater than $600 or an amount that is equivalent to 300 times the amount of the wager that was placed. In the case of winnings from playing bingo games or from a slot machine, anything over $1,200 is required to be reported to the IRS. If you are playing in a physical or online casino and win more than $5,000, this amount must be reported.
The general taxation rate on gambling winnings is 25% of the amount won. If you win the lottery, for example, most state lotteries will withhold this federal rate and any state taxes that may also be applicable. In other situations, an estimated tax, or what is known as a backup withholding tax, of 28% is charged instead of the standard 25%. If you win $3,000 in money bingo online, for example, you would be sent a Form W-2G from the online casino from which you won it.
If tax is withheld from your gambling winnings, you will be sent a Form W2-G from the payer.
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Play money roulette. Gambling Tax Policies for Non-resident Aliens
For anyone who is not a citizen or permanent resident of the U.S., the tax rules are a little more complicated. Nonresident aliens are required to pay tax on any “fixed or determinable annual or periodical gains, profits, and income” from U.S. sources. This would include any monies won from gambling. The tax rate can be as high as 30%.
Gambling Taxation from Winnings in Other Countries
Any citizen of the U.S. is required to report all income, no matter from what part of the world that income is received. Even with the Foreign Earned Income Exclusion (FEIE), it does not cover lottery winnings. If you are taxed in another country for your gambling winnings, the taxes paid to a foreign government are not allowed to be deducted on your U.S. income tax return.
You Can Deduct Your Gambling Losses
If you are someone who itemizes on their income taxes, it may come as a surprise that your gambling losses can be deducted. You can keep track of this by keeping all of your receipts, or you may use the Form 1040 Schedule A. This form can help you to keep track of what you win and what you lose. The amount that you can deduct on your taxes can be up to the amount of money won during the tax year. Slapping people games.
Of course, everyone’s tax situation is different and tax laws can change from year to year. Before you file your taxes, it’s a good idea speak with an accountant or tax attorney in order to be sure of what you are legally required to pay in taxes.
Disclaimer: OnlineUnitedStatesCasinos does not provide tax, legal or accounting advice. We encourage those who are making important decisions on their online gambling taxes to consult with their own certified tax professional before filing with the IRS.
Are online gambling winnings taxable? Yes, whether you gamble at land-based or online casinos, the money you earn is subject to federal income tax. Known as gambling income, the money you earn from wagers and bets as well as lotteries, sweepstakes, etc. all must be taxed.
In some cases, you will be provided with tax forms that must be turned in to the federal government. The full amount of the gambling income minus the cost of the winning bet will be included on this form. Whether you receive this form or not, it’s important to know your responsibilities when it comes to filing income taxes.
The process of handling gambling taxes is not difficult if you know what to do. With this in mind, the OUSC team created this quicktax guide to help US players report their online gambling income.
Do US Players Have To Pay Taxes For Online Gambling?
So, if you enjoy online gambling at sites like BetOnline or Bovada Casino, do you have to pay taxes? When you choose to gamble online, the money you earn is still taxable. Even if the site is located in another country, you still have to pay taxes.
Online gambling is unregulated in most regions of the US, but taxes must still be paid. Just because you do not receive tax forms, does not mean that your winnings are not taxed.
To the IRS, it does not matter where the money is either. If you have funds in your online casino account, even if it’s an offshore site, it’s taxable. When dealing with online gambling earnings, it’s important to review this information with an accountant to ensure you pay the right amount of taxes owed.
Below you will find a list of gambling activities that the International Revenue Service considers taxable:
- Prizes
- Private Party Games
- Tournaments
- Scratch Off Tickets
- Other
How Do You Report Gambling Winnings?
Gambling Tax Laws
The way you report your gambling activities will be dependent on how you win. If you receive a Form W-2G, then this is what you will turn in when filing taxes. Taxes must be filed before April 15th or you must ask for an extension. You will turn this form in as you do your other tax forms for employment to an accountant or tax filing company.
If you do not receive the W-2G form, then you will need to fill out a Form 1040, adding the winnings to Line 21 of the form. The full amount of gambling winnings will be placed on this line.
When filling out the 1040, you will need to configure your losses as well. The expense you had for bets, wagers, etc. will need to be deducted as an itemized deduction. This is done on the “Other Miscellaneous Deductions” line of Schedule A form. This will help to lower the tax amount paid on your total gambling income.
What Types of Records Do You Need?
The information you record while enjoying online gambling can be used during the filing process. It’s important to maintain a log or diary of all your losses and winnings. Keep in mind the following information:
- Dates: You will need to record the date and type of activity completed, including wagers and winnings.
- Location: List the name and location of the gambling facility. In the case of online gambling, this would be the website, such as MyBookie or Café Casino.
- Checks: If you are sent any checks in the mail from winnings, be sure to keep the check stub.
- Paperwork: For some players, winnings will be sent via mail and any paperwork should be kept and used during filing as needed.
Don’t Forget To Pay Your Online Gambling Taxes
When you gamble online, it is important to enjoy yourself, but also remember to file your winnings! The IRS takes gambling money very seriously and you want to be sure that you pay your taxes accordingly. If you need any additional information, be sure to visit the official website of the IRS to find all the previously mentioned forms you will need fo file your taxes.