You don’t have to drop by a casino or a race track to bet on sports, either. Gamblers can take home winnings after fantasy football games, office parties, and Saturday night poker. That cash isn’t necessarily free and easy, however. Gambling winnings, just like any other income, are taxed in the United States. You must report your winnings The first rule is that you must report all winnings, whether another entity reports them to the government or not. For example, if you hit the trifecta on Derby Day, you must report the winnings as income. The second rule is that you can’t subtract the cost of gambling from your winnings. Not reporting all of your taxable income. Those 1099’s and W-2s you received this past January? If you have gambling winnings or losses, they must be reported on your tax return. When you prepare and e-File your return on eFile.com, you will report your gambling income or losses during the tax interview which will lead to a request for more information.
- When Do Casinos Report Winnings
- When Do You Have To Report Casino Winnings
- Do I Have To Report Casino Winnings
- Do You Have To Report Casino Winnings To Irs
- Do You Have To Report Casino Winnings To Social Security
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Do you like to gamble? If so, then you should know that the taxman beats the odds every time you do. The Internal Revenue Service and many states consider any money you win in the casino as taxable income. This applies to all types of casual gambling – from roulette and poker tournaments to slots, bingo and even fantasy football. In some cases, the casino will withhold a percentage of your winnings for taxes before it pays you at the rate of 24 percent.
Casino Winnings Are Not Tax-Free
Casino winnings count as gambling income and gambling income is always taxed at the federal level. That includes cash from slot machines, poker tournaments, baccarat, roulette, keno, bingo, raffles, lotteries and horse racing. If you win a non-cash prize like a car or a vacation, you pay taxes on the fair market value of the item you win.
By law, you must report all your winnings on your federal income tax return – and all means all. Whether you win five bucks on the slots or five million on the poker tables, you are technically required to report it. Job income plus gambling income plus other income equals the total income on your tax return. Subtract the deductions, and you'll pay taxes on the resulting figure at your standard income tax rate.
How Much You Win Matters
While you're required to report every last dollar of winnings, the casino will only get involved when your winnings hit certain thresholds for income reporting:
- $5,000 (reduced by the wager or buy-in) from a poker tournament, sweepstakes, jai alai, lotteries and wagering pools.
- $1,500 (reduced by the wager) in keno winnings.
- $1,200 (not reduced by the wager) from slot machines or bingo
- $600 (reduced by the wager at the casino's discretion) for all other types of winnings but only if the payout is at least 300 times your wager.
Win at or above these amounts, and the casino will send you IRS Form W2-G to report the full amount won and the amount of tax withholding if any. You will need this form to prepare your tax return.
Understand that you must report all gambling winnings to the IRS, not just those listed above. It just means that you don't have to fill out Form W2-G for other winnings. Income from table games, such as craps, roulette, blackjack and baccarat, do not require a WG-2, for example, regardless of the amount won. It's not clear why the IRS has differentiated it this way, but those are the rules. However, you still have to report the income from these games.
What is the Federal Gambling Tax Rate?
Standard federal tax withholding applies to winnings of $5,000 or more from:
- Wagering pools (this does not include poker tournaments).
- Lotteries.
- Sweepstakes.
- Other gambling transactions where the winnings are at least 300 times the amount wagered.
If you win above the threshold from these types of games, the casino automatically withholds 24 percent of your winnings for the IRS before it pays you. If you cannot provide a Social Security number, the casino will make a 'backup withholding.' A backup withholding is also applied at the rate of 24 percent, only now it includes all your gambling winnings from slot machines, keno, bingo, poker tournaments and more. This money gets passed directly to the IRS and credited against your final tax bill. Before December 31, 2017, the standard withholding rate was 25 percent and the backup rate was 28 percent.
The $5,000 threshold applies to net winnings, meaning you deduct the amount of your wager or buy-in. For example, if you won $5,500 on the poker tables but had to buy in to the game for $1,000, then you would not be subject to the minimum withholding threshold.
It's important to understand that withholding is an entirely separate requirement from reporting the winning on Form WG-2. Just because your gambling winning is reported on Form WG-2 does not automatically require a withholding for federal income taxes.
Can You Deduct Gambling Losses?
If you itemize your deductions on Schedule A, then you can also deduct gambling losses but only up to the amount of the winnings shown on your tax return. So, if you won $5,000 on the blackjack table, you could only deduct $5,000 worth of losing bets, not the $6,000 you actually lost on gambling wagers during the tax year. And you cannot carry your losses from year to year.
The IRS recommends that you keep a gambling log or spreadsheet showing all your wins and losses. The log should contain the date of the gambling activity, type of activity, name and address of the casino, amount of winnings and losses, and the names of other people there with you as part of the wagering pool. Be sure to keep all tickets, receipts and statements if you're going to claim gambling losses as the IRS may call for evidence in support of your claim.
What About State Withholding Tax on Gambling Winnings?
There are good states for gamblers and bad states for gamblers. If you're going to 'lose the shirt off your back,' you might as well do it in a 'good' gambling state like Nevada, which has no state tax on gambling winnings. The 'bad' states tax your gambling winnings either as a flat percentage of the amount won or by ramping up the percentage owed depending on how much you won.
Each state has different rules. In Maryland, for example, you must report winnings between $500 and $5,000 within 60 days and pay state income taxes within that time frame; you report winnings under $500 on your annual state tax return and winnings over $5,000 are subject to withholding by the casino due to state taxes. Personal tax rates begin at 2 percent and increase to a maximum of 5.75 percent in 2018. In Iowa, there's an automatic 5 percent withholding for state income tax purposes whenever federal taxes are withheld.
State taxes are due in the state you won the income and different rules may apply to players from out of state. The casino should be clued in on the state's withholding laws. Speak to them if you're not clear why the payout is less than you expect.
How to Report Taxes on Casino Winnings
You should receive all of your W2-Gs by January 31 and you'll need these forms to complete your federal and state tax returns. Boxes 1, 4 and 15 are the most important as these show your taxable gambling winnings, federal income taxes withheld and state income taxes withheld, respectively.
You must report the amount specified in Box 1, as well as other gambling income not reported on a W2-G, on the 'other income' line of your IRS Form 1040. This form is being replaced with a simpler form for the 2019 tax season but the reporting requirement remains the same. If your winnings are subject to withholding, you should report the amount in the 'payment' section of your return.
Different rules apply to professional gamblers who gamble full time to earn a livelihood. As a pro gambler, your winnings will be subject to self-employment tax after offsetting gambling losses and after other allowable expenses.
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Inrecent times, the number of people who travel to gambling centers orregions where gambling is a lucrative business is on the high side.Reno and some cities of Las Vegas welcome several travelers for thispurpose.
Justso you know, if you win big while gambling, you do not get to keepevery cent to yourself. Now someone is asking, why? Well, gamblingwinnings are taxable! …it’s as simple as that!
So,just before you embark on any journey for the sole aim of gambling,take some lessons on tax laws relating to gambling and be sure tounderstand every piece of information you find therein just so youavoid the Internal Revenue Service (IRS) and its stress.
A little explanation of why gambling income is taxable.
Now,you’ll ask … “is gambling income taxable?” well, don’tstress it, the answer is not far- fetched!
Yes!Gambling income is taxable and just before the smiles on your facedisappears into thin air, there is good news for you as an earner…hang in there!
Unlikenormal income taxes, taxes placed on gambling are constant. That is,not progressive.
So,you have nothing to worry about. Be it winning a $3 million at thepoker table or $1500 at the slot machine. So, when you hit a big one,25% of your big win is to go to whichever game you play.
Plus,you will be provided with an IRS form which is also known as a W2-Gto enable you to report your earnings and winnings to the government.Keep in mind that this threshold depends on the type of game.
Anothersuitable question to ask is this, “do these games report theirgambling earnings? Definitely!
Aquick look at some examples; for specificity, in the casino, in orderfor your winnings to be reported, there is one inevitable thresholdthat should be declined.
Anotherexample is the slot machines; for winnings above $1200, it isrequired of you to report them.
Forthat of horse tracks, winnings that are greater than $600 or that are300 times your initial wager must be reported.
Thecase is not different for bingo as it is similar to the slot machine.Every winning from $1200 should be reported.
Thepoker tournament is no different as every winnings Greater than $5000must be reported.
Inspite of all these, it is not required of Casinos to hold taxes orissue a W2-G that was mentioned earlier in this article to playerswho win big amounts at some table games. For example, roulette,blackjack, craps.
Thereason for this kind of segregated requirement made by the IRS isunknown to us perhaps but known to them.
Froma well-observed point of view, in the table games, a level of skillis required whereas the slot machines are merely a game of chance.So, it is not expected of casinos to ascertain for sure the amountyou begin with when you cash in your chips from a table game.
Nowyou ask, “What happens when a W2-G is not sent to me or whathappens when I do not get a notification? Your question might also beasked in this form… What happens if my taxes are being withheldfrom blackjack winnings?
Beforeyou raise your hands high in the air while smiling thinking you canoutsmart all these, just a gentle reminder, not receiving a W2-G formor having withheld taxes does not relieve you of your duties toreport whatever is been won to the IRS.
Thenext question that should readily come to mind is “what should Ido in cases like this?” It’s simple! Do it yourself! You willsave yourself a whole lot of mess by filing your taxes alongside yourother taxes for the year rather than at the casino where you claimyour winnings.
Now,someone is saying, “oh! I’m a professional gambler, gambling iswhat I do for a living, mine is quite different, how do I report mytax?”
When Do Casinos Report Winnings
Ifgambling happens to be your real profession then, your revenue willbe tagged as regular earned income hence, it will be taxed at thenormal effective income tax rate of a taxpayer.
Keepin mind that your income and expenses compulsorily must be recordedon Schedule C, if you are self-employed.
Hereis a poser. Ever wondered if individual states tax gambling winnings?Well, to answer the poser, certainly, they do.
Insome states, it is required of gambling winners to claim theirwinnings in the state where they were won irrespective of your placeof domicile. Also, your state of residence will require you to reportyour winnings but, at the same time give a deduction for the taxesthat have already been paid in the non- resident state.
Seemslike we are missing out on something really important which happensto be our big question for this article.
Everthought of what will happen if you do not report your gamblingwinnings? Well, enough of the rambles and mumbles as your eye-rollinghas confirmed the answer. Well, we know it’s a “No” simplybecause when that thought crossed your mind, you waved it off withthe back of your hands.
But,guess what? Dust your rackets as we will be hitting off some balls ofquestions as regards that.
Itis quite easy to shrug off the idea of reporting your gamblingearnings whenever that thought creeps into mind because we all wantto enjoy our bucks without any external force trying to snatch itfrom us.
Sosad! Now might not be a perfect time to let that slide as you do notwant to get involved with the IRS. Bet it could get messier thanimagined.
Aswe all know that the most difficult thing in the world to understand,as stated by Albert Einstein, is the concept of income taxes.
However,it is pertinent that you report the full amount of your gamblingwinnings as “other income” on line 21 of form 1040 asstated by the IRS. Also, you must distinctly claim your allowablegambling losses.
Itis unknown to many that the IRS does not permit reducing or netting,gambling winnings by gambling losses and just reporting thedifference. Well, it is considered that such a person owes the IRSback taxes, interest and penalties.
Justso you know, gambling losses up to your winnings must be claimed asan itemized deduction on Schedule A, under the heading “othermiscellaneous deductions”. Where the problem lies is that asidesnetting, there are more than 65% of taxpayers who don’t itemize theirdeductions and can’t deduct gambling losses pay more tax on grosswinnings than they won.
Besides,losses accumulated from gambling cannot be moved forward tocounterbalance winnings in another year.
Incase you haven’t heard, the IRS takes a hard line on gambling income.Hence, in an audit, without providing enough documentation, the agentwill fail to believe you’re losing all winnings. That is, you musthave sufficient documentation to prove your loss so, keep your losingtickets alongside all other important documents you’ve got.
Whatwill a proper record-keeping require of you?
Aproper record-keeping will require a date, the type of gamblingactivity or wager, the name of the gambling establishment, theaddress of the gambling business and the number, list of peoplepresent with you plus the inevitable, amount won or lost.
Insome cases, it will be of utmost importance for you to keepsupplements hotel bills, gas cards, and airline tickets just to provethat they were not part of ATM gambling funds.
Sometimes,the IRS fails to take into consideration the credibility of the ATMreceipts forgetting that the ATM cash receipt could have been used topurchase the nondeductible like cinema bills, spa treatment, salon,restaurant meals.
When Do You Have To Report Casino Winnings
So,we urge you to input all the ATM funds received to fund the gamblingsessions as evidence for your gambling records.
Do I Have To Report Casino Winnings
Keepin mind that the IRS kicks against the player’s reward card as it ismost times an ingenuine way to prove gambling loses because othergamblers have used the card.
Youridentity and evidence that you were the only one using the cardshould all be in your gambling records.
Yourgambling log is being supported and given credibility by document andwin-loss reports. So, put your journal to substantiate the player’scard at every gamble.
Do You Have To Report Casino Winnings To Irs
Inconclusion, we urge you to be careful just in case because manystatements do not provide substantiative evidence simply becauseestimates are being used. Also, do not hesitate to report every ofyour gambling winnings.
Do You Have To Report Casino Winnings To Social Security
Cheers!