How Gambling Taxation Works in the United States

There is no better feeling than landing a winning sports bet or beating rivals to victory in a real dealer online casino game. Not only do you have the satisfaction of bragging to your friends about your success but you also have the winnings to claim. Unlike in the United Kingdom, where there is no tax on gambling winnings, there is tax on gambling winnings in the United States. If you win money when gambling in the US, you are responsible for playing tax on that amount of money. With that in mind, let’s look at how gambling taxation works in the United States.

Online and Offline

Gambling taxation applies both online and offline in the United States. That means, if you win money playing at a Las Vegas casino or at home using an online casino, you will have to pay tax on that money. You can even play live casino games on your mobile and will still have to pay tax on any winnings. At the time of writing, 24% of gambling winnings over a certain amount will be kept by the Inland Revenue Service. The IRS considers any money won from gambling to be a financial gain and therefore, it is liable to taxation. Money gained from gambling, both online and offline in the US, is seen as income by the IRS. Federal taxes must be paid on gambling winnings in the United States and if your winnings exceed a certain amount, the payer will provide you with a W-2G form to complete.

Federal Taxes on Different Games

In terms of the total amount of federal tax payable when winning money gambling in the United States, it differs depending on the type of game you have played. For example, you will need to complete a W-2G form if you win over $5,000 from a poker tournament. This amount can be reduced by the wager and the buy-in but as soon as the final winnings hits the $5,000 mark, tax must be paid. The $5,000 threshold also applies to sweepstakes, lotteries, and betting pools winnings.

When playing slot machines or bingo, the total amount required in winnings before taxation is $1,200 and this cannot be reduced by the wager. When playing keno, the sum for taxation begins at $1,500 and this can be reduced by the wager. Any other form of gambling, such as sports betting is set at $600 and this amount must be at least 300 times the wager.

Each of the gambling winnings highlighted above is subject to a flat rate of 24% tax. Sometimes, if the win is big enough, the payer will deduct the tax for you and in this case, you are not required to pay any further tax on the money. However, you must still declare the winnings. Now you know how gambling taxation works in the United States on a federal level but what about state level?

State Gambling Taxes

There are still some states in the US that do not take any income tax. That means you do not have to worry about paying tax on gambling winnings. Some of the states that do not collect income tax include Alaska, Florida, New Hampshire, South Dakota, Tennessee, Texas, and Washington. However, there are states where you are required to pay state taxes on gambling winnings and this is in addition to the federal tax. Some states that require tax to be paid on gambling winnings, in addition to federal tax, include Arizona, Colorado, Delaware, Indiana, Kansas, Michigan, New Jersey, New York, and Pennsylvania.

Even if you are visiting a state and you win money gambling, you can still be liable to pay the state tax on the winnings. When you have a W-2G form to complete, the state in which you won the money will also receive a copy of the form. You can get a tax credit for your own state and that will stop you from being taxed twice on the same amount of money.

If you are a professional gambler and that is what you state as your occupation, you can list expenses related to gambling on a tax return. However, if you are a casual gambler, you cannot make any deductions on the money you have made from your gambling activity.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes