Gambling taxes on your winnings are not exempt. If you are a U.S. citizen you owe Uncle Sam a share, regardless if won here or abroad. The IRS considers all gambling winnings taxable income, even if it’s an amount that does not get reported to the IRS by the payer, like that $20 win on a scratch off ticket, or a lucky $250 when your numbers hit, even a $1,000 jackpot on your favorite slot machine. Sadly, gambling taxes are due.
So what does get reported to the IRS? Larger amounts that are
won at gambling establishments such as casinos, lottery retailers, horse race
tracks and off-track betting parlors. They will issue a form W-2G, one copy to
you and one to the IRS. Here are some details:
$1,200 or more won at a slot machine, video poker, video
keno, video blackjack, etc. This only applies to a single jackpot payout amount. Accumulated
credits are credit meter wins and do not count.
$1,200 or more won at a live bingo game will also trigger a
W-2G, and $1,500 or more at a live keno game (minus your wager amounts).
The casino will not withhold any gambling taxes from awards
in the $1,200 to $1,500 range provided you present a valid photo ID and social
security number. If you do not provide this information, 28% will be withheld.
Winnings from live table games are not reportable on a W-2G,
except if there is a very large prize amount offered for a small wager, such as
a dollar bet for a shot at a progressive table jackpot, where the winning odds
are over 300/1 and the win is more than $600. For example, Caribbean Stud
offers a huge progressive jackpot for wagering only $1, if you’re lucky enough to
hit a Royal Flush.
If you win $600 or more in any other wagering game, such as
horse, dog racing or sports betting, and the amount is at least 300 times your
bet minus your wager amount, the establishment will gift you with a W-2G. If
your winnings exceed $5,000 and the amount is more than 300 times your bet, 25%
will be withheld. The same withholding percentage also applies to any cash
prize of $5,000 or more in poker or other card tournaments minus the buy-in amount.
Winnings on state lottery games such as lotto, numbers, scratch-offs, etc can be collected at your local retailer up to $600. Any more and you'll
have to visit the main lottery office in your community, where a W-2G also awaits you.This information is from the New York lottery. Other states may have different rules.
Winnings on Daily Fantasy Sports (DFS) contests at this time are considered games of skill. DFS sites will issue a 1099-MISC, not a W-2G for winnings of $600 or more.
$600 or more in winnings from any class II Video Lottery
Terminal (VLT) game will also invite a W-2G. This includes any winnings on
machines at jurisdictions that are operated by a state lottery. For example,
New York State has nine race racks with VLT’s that are pseudo slot and video
The good news in all of this is that gambling losses are tax deductible but only up to the amount of your winnings, and only if you itemize deductions on your tax return.
The IRS wants to make sure that you indeed lost what you
claim you lost, so a record of all your losses is required. Win- loss
statements are available from most major casinos at the end of the year,
provided you used your player’s club card when playing machines. Save those
losing scratch-off tickets, Lotto, Powerball, and Mega-Millions tickets, daily
numbers, Quick Draw, OTB, etc.
For losses on DFS contests, the IRS position at this time is unclear. Because of the skill factor, your winnings are in the hobby category. Therefore any gambling losses would not be deductible, although this situation could change at any time.
You don’t have to record the tickets on your tax statement, but they may be necessary if you are audited. All the IRS wants to know is the type of wager, the amount of the bet and the date of the transaction.
Always play it safe and check with your tax preparer for your personal needs. For additional information about tax requirements for gambling winnings log on to www.IRS.gov and search Gambling Winnings.
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