Winnings in the following amounts must be reported to the IRS by the payer: $600 or more at a horse track (if that is 300 times your bet) $1,200 or more at a slot machine or bingo game $1,500 or more in keno winnings. Reporting Gambling Profits and Loss on Your Taxes Gambling Losses Can Be Deducted on Schedule A. If you itemize your deductions, you can deduct your gambling losses for the year on Schedule A. However, you can only deduct your loss up to the amount you report as gambling winnings. You must report all gambling winnings as 'Other Income' on Form 1040 or Form 1040-SR PDF (use Schedule 1 (Form 1040 or 1040-SR) PDF), including winnings that aren't reported on a Form W-2G PDF. When you have gambling winnings, you may be required to pay an estimated tax on that additional income.
What is a Form W-2G
When most people think about their income, they think about their paychecks, their net business profit, their pension or social security income—the money they've worked for and count on every month to pay their bills and cover their expenses. However, not all income is the product of hard work or financial planning, and sometimes a taxpayer can generate income with the flip of a card or the roll of the dice. Lucky lottery players and casino goers likely don't think about the tax consequences of winning big, but after crossing a certain earnings threshold, those winnings are treated as taxable income.
IRS Form W-2G is issued by a casino or payer to taxpayers who have earned above a specific threshold to report gambling winnings. A payer may also send an IRS Form W-2G if it withholds a portion of your winnings for federal income tax purposes.
Do I have to report my gambling winnings to the IRS?
The IRS treats gambling winnings as taxable income, which must be reported on a tax return. In order to keep track of taxpayer's gambling winnings, the IRS requires the paying entity (such as the state lotto commission, the casino, or the racing track) to report winnings over a certain threshold.
If a taxpayer wins more than:
- $1,200 from a slot machine or bingo game,
- $1,500 of proceeds from keno,
- $5,000 of proceeds from a poker tournament,
- $600 of winnings from any other game where payout is more than 300 times the wager,
- or any other winnings subject to tax withholding,
then he or she can expect to be required to provide identifying information which allows the paying entity to issue an IRS Form W2G.
Form W-2G Instructions
Form W-2G will request that the taxpayer provide the following information:
- The amount of gross winnings
- The date the winnings were won
- The type of wager that was made
- The amount of federal and state income tax already withheld
When filing his or her tax return, the taxpayer will need to add up all IRS Form W-2Gs received in that year, along with any smaller gambling winnings that may not have triggered an IRS Form W-2G requirement. The taxpayer will also be required to include those earnings as 'Other Income' on the first page of his or her IRS Form 1040 return.
Even if you don't receive a W-2G in the mail before tax season rolls around, you will still be legally obligated to report your earnings on your year-end tax return. Keeping careful track of all of your financial documents, such as wager statements, payment slips, and other gambling receipts, will ensure that you're able to accurately report your earnings come tax time.
Are gambling losses tax deductible?
Maybe you enjoy gambling, but you're not always so lucky with your winnings—there is one bit of good news for you. Although you can't report your net winnings, you can report your gambling losses as an itemized deduction on Schedule A. However, there's a catch: losses can only be deducted up to the amount of gambling winnings in a given year.
Reporting Gambling Winnings On Tax Return Refund
For example, if a taxpayer spends $500 at the casino, and wins $5,000, he or she will only have to pay taxes on the $4,500 of profit, as long as he or she has proof of the $500 spent. On the contrary, if a taxpayer spent $5,000, and only won $500, there will be no extra tax imposed on the gambling winnings, although the extra $4,500 of loss cannot be used to offset any other non-gambling winnings.
Do keep in mind that the IRS will only accept proof if they believe that the taxpayer him or herself actually suffered the losses—IRS rulings have refused to allow loss deductions based on tickets covered in dirt and footprints, as though they had been collected from the ground after another unlucky gambler had dropped them there.
How much tax is already withheld from gambling winnings?
Gambling facilities have the power to withhold part of your winnings for federal tax purposes, however this power depends on the type of gambling activity participated in and the amount of money won. On IRS Form W-2G, the amount already withheld can be found is noted in Box 4, and state and local tax withholdings are noted in Boxes 15 and 17.
Slot machine near bay area rugs. To date, there are two types of withholding for winnings from gambling: regular withholding and backup withholding.
Reporting Gambling Winnings On Tax Return Filing
Regular Withholding: The payer withholds 25% of your winnings on cash payments where the winnings minus the wager totals to $5,000 or more.
This applies to winnings from:
- Wagering pools
- Sweepstakes
- Lotteries
- Other wagers (if the winnings total at least 3,000 times the amount of the wager)
Note that regular withholding only applies to non-state lotteries, sweepstakes, and wagering pools, and that the withholding rate rises to 33.33% for non-cash winnings.
Backup Withholding: The payer withholds 28% of your winnings earned from keno, bingo, slot machines, and poker tournaments. This typically only applies when winnings total to:
- At least $600 and at least 300 times the original wager,
- At least $1,200 from bingo or slot machines,
- $1,500 from keno,
- $5,000 from a poker tournament.
Reporting W-2 Gambling Winnings On Tax Return
Taxpayers may also see their gambling winnings subject to backup withholding if they fail to provide the correct taxpayer identification number to the payer.
Reporting Gambling Winnings On Federal Tax Return
Community Tax can assist with your IRS Help and gambling winnings. Contact Community Tax today for a free consultation: (844) 247-2781
