Gambling taxes overview - When you win, so does the IRS!
When it comes to gambling, some people will win money, and others will lose money. This is quite simply the nature of gambling. However, it's essential to know that even if you win, you could become a loser if you don't get your gambling taxes by state right. This is because any winnings you make from gambling are considered taxable income by the IRS. So if you win, so does the IRS. There's no way around paying your taxes on anything, and gambling is no exception.
Taxable winnings from gambling aren't just from what you make by playing card and casino games; you also have to pay gambling taxes by state on your winnings from poker, bingo, lotteries, racetracks, game shows, sweepstakes, and any other form of gambling. Particular rules and regulations apply to income from gambling and there are strict requirements set by the IRS that you have to remain compliant with. While it's possible to deduct gambling losses, any income that you make from gambling is typically reported on Form W-2G.
Basically, Form W-2G is an official tax document that's sent to you by an online casino or gambling establishment. You will only receive one of these forms if you had winnings during the previous year from gambling that exceeds the gambling taxes by state threshold. You have to file this form to report all of your gambling winnings and any federal income tax that's been withheld. The requirements for reporting and withholding income tax depend on the total amount of winnings, the type of gambling, and the ratio of winnings to your wagers.
All proceeds from gambling are taxable, but only some winnings from gambling need to be recorded on Form W-2G. If you don't need to fill out Form W-2G, you still have to include your gambling winnings in a regular tax return. According to the rules set by the Internal Revenue Service (IRS), you must report any winnings made from any type of gambling. So whether you have gambling winnings from lotteries, sports betting, casino games, or any other form of gambling, you have to report your winnings. It doesn't matter how much or little you win either; everyone is required to meet the rules and regulations set by the IRS.
Gambling establishments and online casinos are required to send the Form W-2G under the following circumstances:
- If you make over $1,200 from playing slots or bingo games.
- Whenever you make winnings over $1,500 from playing keno.
- If you win over $5,000 from taking part in poker tournaments.
- Whenever the payout is 300 times or more than the value of the bet and over $600.
There are certain types of gambling, such as games of skill, that do not need to be recorded on a W-2G form. However, any income from gambling is taxable nonetheless. If you're wondering how winnings are calculated, it's done by subtracting the value of bets from the total payout.
If the online casino or gambling establishment sends you a W-2G and you don't report the winnings you made from gambling, you'll ultimately receive a notice from the IRS via mail. The notice will include important information about any discrepancies and the action that's required to put things right. If you don't exceed the threshold for the relevant gambling activity, you won't receive a W-2G.
However, this doesn't mean you don't have to report your gambling winnings as income, no matter how big or small. Because of this, we highly recommend keeping a record of your payment slips and betting statements each time you partake in gambling. This will make it easy for you to fill out the form but also help verify the accuracy of any information that's included on a W-2G form if you receive one. If you're someone that likes to gamble at multiple establishments or casinos, you will likely receive more than one form. If that's the case, you must fill out each form individually. For professional gamblers, you need to report your winnings as business income. On the other hand, if you're a casual gambler, you should report your winnings as "Other Income" on Form 1040.4.
Gambling tax withholding on winnings
Whenever taxes are withheld by the operator, you won't have to pay the tax directly, but you will most likely have to report the winnings on your tax return. There are two different types of federal income tax withholding; regular and backup. Regular withholding is when the gambling establishment or casino withholds 24% of your winnings when the total value is at least $5,000. The regular withholding applies to winnings from gambling activities such as wagering pools, lotteries, and sweepstakes. On the other hand, backup withholding is also 24% but only applies to winnings from gambling activities such as slots, poker tournaments, bingo, and keno. Backup withholding is made under the following circumstances:
- When the regular withholding for gambling tax wasn't made.
- If you didn't provide a valid taxpayer identification number (TIN) to the gambling establishment.
- When your total winnings have a value of at least $600 for horse racing, more than $1,200 from slots and bingo games, over $1,500 from keno, or in excess of $5,000 from a poker tournament.
Of course, if your total income falls below the gambling tax rate by state, you may owe less and receive money back. The W-2G provides information about federal income tax withholding, but the W-2G also includes details about gambling tax rates by state that are withheld.
Keep a record to stay on top of the gambling tax rates by state
To avoid any unwanted situations with the IRS, you should keep a detailed record of your gambling winnings and losses. This means any documentation such as bank statements, receipts, and payment slips can go a long way in helping you prove both your gambling winnings and losses. These documents are essential if you want to deduct your losses and pay less of your gambling tax rate by state. Here's some additional information that you should keep a record of:
- Type of gambling activity.
- Name and address of the establishment where you partake in gambling.
- Date(s) when you gamble.
- Total winnings and losses.
Whether you're playing at the best gambling sites US has to offer, or you're playing in person at a land-based establishment, you'll have to pay tax on your winnings. This is something you shouldn't overlook, so it's important to do your research into the gambling tax rates by state. Since there are so many different rules and regulations, you can never be too careful when it comes to gambling taxes. The information on this page is as accurate as possible, but gambling tax rates by state are subject to change, so you should always make sure that you understand what's expected of you before playing.
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The current gambling tax rates by states in the USA
At the time of writing, here are the gambling tax rates by state:
In the home of the Grand Canyon, you'll pay 24% in federal taxes and 4.8% in state income taxes.
If you're a Golden State resident, you'll pay between 1% to 13.3% based on your income bracket.
Every dollar that you make from gambling in Colorado is a taxable income. You'll pay 10% on all casino and sportsbook winnings in the Centennial State.
Operators withhold 6.99% of all gambling winnings for state tax purposes in Connecticut.
Just like casino payouts by state, the taxes in Illinois vary. You'll pay between 10 and 37%, depending on your income bracket.
Casinos usually withhold 24% of your winnings for tax purposes.
5% flat tax on winnings earned in the Hawkeye State. Also, 24% is usually withheld for federal taxes.
10% for retail sports bets and 15% for online and mobile sports betting.
24% federal tax and 8.95 state tax in the Maryland State.
You'll need to pay a flat rate of 5% on gambling winnings.
It's mainly federal taxes at 24% that you'll have to worry about in Michigan. But beyond the federal tax, there's a state tax rate of 4.25%.
Operators will withhold 3% for tax purposes. Not bad in comparison to some other states!
There's a tax rate of 20% at retail establishments in the Tree Planters' State.
3.5% on anything under $50,000, 4.5% on winnings up to $134,000, and 6.75% on anything over $134,000.
10% is the flat rate for all gambling activities.
Withholding rates at New Jersey gambling sites vary from 5% to 8%, depending on your lottery winnings. Anything over $500,000 is taxed at 8%, but you will also have to pay 8% on anything over $10,000 if you fail to provide a taxpayer ID.
The standard NY state gambling tax rate is between 4% and 8.82%, depending on your winnings. The lowest rate is 4% for anything up to $4000, while the highest rate is 8.82% for anything over $1,077,550.
Casinos licensed in Ohio withhold 4% of your winnings for tax purposes, which means Ohio has considerably lower rates than other states.
There is an 8% tax on winnings worth over $600.
All winnings need to be documented with form PA-40, Schedule T. The standard tax rate is just 3.07%, which means Pennsylvania gambling sites payout higher percentages than most sites in other states.
The state tax comes in at 5.99%, so you can expect to pay 29.99% tax in total.
The state tax rate on gambling in Virginia ranges from 2% to 5.75%, depending on your tax bracket.
Tax on gambling winnings: in addition to the federal tax of 24%, you'll pay between 3% and 6.5% in state taxes.
Tax on gambling winnings: Among the 22 tribal casinos in the Cheese State, everyone pays up to 7.65% in taxes on gambling winnings.
Tax on gambling winnings: sports betting is taxed at a rate of 10% in the Equality State.
Conclusion - the gambling tax rate by state varies considerably
As you now know from reading our comprehensive guide about gambling taxes by state, every dollar that you make from gambling is taxable in the US. We appreciate that taxes can be challenging to grasp, especially when so many individual states have their own rules and regulations. That's why we created this guide that includes details about the tax rates and how they're paid, which should make it easier for you to stay on top of things.
That said, the tax rates can and do change – as do the regulations surrounding gambling activities themselves. Because of this, you can never be too careful when it comes to paying your taxes on gambling winnings. Therefore, we suggest you make a record of the important details each time you gamble. Not only should you keep track of your wins and losses, but you should also document the dates and types of gambling activities that you play. Take the extra steps to keep track of your winnings and losses, and you'll find that it comes in handy for deducting your gambling losses each year!
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Gambling taxes by state FAQ
🚩 Which states have high gambling taxes?
According to the Internal Revenue Service (IRS), all gambling winnings are fully taxable in the US. This includes winnings from poker tournaments, sports betting, casino games, lotteries, sweepstakes, and everything in between. So whether you're in New York, Iowa, Pennsylvania, or any other state with a thriving gambling industry, you'll have to pay tax on your winnings. You can deduct losses by itemizing your taxes, but if you're in a state with high gambling taxes, it won't have much of an impact. See our guide here at Strafe.com for all the details you need to know. We make it easy for you to compare the gambling taxes in each state.
❓ How much tax do I need to pay on gambling winnings?
The tax rates for gambling vary dramatically between each state in the US. The same goes for the rules and regulations relating to gambling activities themselves. Because of this, even experienced gamblers can feel confused by what's going on. That's where we at Strafe.com come in. Our betting guides go beyond the usual topics; we dig deeper into impactful subjects such as taxes and regulations to make your iGaming experience as smooth as possible. Read our latest guide for the most up-to-date taxation info.
🙋 What's the gambling tax rate in my state?
Taxes on gambling winnings vary significantly from one state to the next. Some states have low rates, while others are undeniably steep. Of course, the state tax might not be too much of a concern for you. However, if you're unaware of your state tax rate before you start gambling, you don't want to find out when it's too late. We've gathered all of the essential information into one guide right here at Strafe.com. So whether you're from New York, New Jersey, Iowa, Pennsylvania, or any other state with a thriving gambling industry, read our guide to learn more about the local and federal taxes in your state.
🚀 Which states have the lowest tax rates on gambling?
When you gamble, the aim is to win money and have a great time doing so. The only problem is that most people are focused too much on winning and having a great time but not enough on what the government might tax you on your winnings. Of course, the US federal government always takes a cut of your gambling winnings. But on the state level, each state sets its own tax rate for gambling income. Some are considerably better than others due to their low rates. Visit us here at Strafe.com for all the information you need about the gambling taxes in each state.
