You’re Kidding! Am I Really Expected to Pay Tax on My Casino Winnings?
Dissecting one of the most commonly asked questions pertaining to casino gambling – are my casino winnings taxed?
Whether or not you will be taxed on your casino winnings will entirely depend on where in the world you live. While there are a handful of countries that don’t tax casino winnings, unfortunately; the United States of America isn’t one of these countries. In the US, you will have to give a certain portion of your casino winnings to the government (for wins above a certain amount). Nevertheless, there are a lot of nuances to gambling taxes, which we will unpack in this article.
Yep. You’ve read that correctly. You are indeed taxed on your casino winnings. And while this is an unfortunate reality, perhaps you’re better off looking at it as a ‘glass-half-full situation. Think of it like this: you’ll still be taking home with you some cash that was otherwise non-existent before. In fact, Woo Casino’s free spins offers increase your chances of this happening.
The Basics of How Gambling Profits are Taxed
Essentially, you are only taxed at source if you win a certain amount of money while playing a casino game. In this case, the casino operator will subtract 24% of your winning amount and only pay you the rest of the amount. For the deducted or taxed sum, the operator will hand you a copy of the Internal Revenue Service’s Form W-2G. This document is your record of the at-source tax deduction.
So, you might be wondering how much you could win without being taxed anything at all. Well, as far as casino gaming winnings are concerned, this amount depends on which game you were playing.
If you won while playing a slot machine or while playing Bingo; then any winnings of $1200 or more are taxed. If you won less than $1500 while playing keno, you are exempt from tax, but $1500 or more is taxable. For sweepstakes games, pooled jackpots, and lotteries, any winnings equal to or more than $5000 are taxable.
Games of skill:
On the other hand, casino games that are considered “games of skill”, such as Blackjack, Craps; and Roulette are not taxed at source, but you must report these winnings when filing your taxes for the year. So, if you won a Blackjack game, the operator will pay you the entire sum. It is still your responsibility to report these winnings.
The 24% tax on your casino winnings is basically a ballpark figure at the time it is deducted. Depending on how much tax you owe; you might receive some of the paid tax back or you may have to pay even more. This is determined when you file your taxes for the year.
Casino players should ensure that they keep a tab on their gambling transactions, be it wins or losses. This is because taxes are chargeable on net profits. So, if you spent $1600 on a slot game and won $1600; then you may not have to pay any taxes since your net winnings, in this case, is zero.
It is not simply a recommendation that you maintain your gambling transactions; in fact, the IRS required you to maintain information about each gambling win or loss. The information you need to maintain is – the date, type of gambling, name, and address of the casino; names of any other people that may have been present at the time of gambling; the amount won, and the amount lost.
How to Report your Casino Winnings when Filing Annual Taxes
When you file your taxes for the year in which you received a gambling payout; you’ll record it under “Other Income” on Form 1040. If you’ve already paid the 24% tax on these winnings, you will account for that on the form as well.
Keep in mind that the 24% you previously paid was an estimate. The actual amount you owe or the amount you still need to pay is determined on your total annual income for that year.
Currently, there are seven tax brackets. To owe more taxes on your wins, you’d have to have an individual income of more than $164,925; and this number includes your casino winnings. If your total income was less than $86,376, you may be eligible for a refund. The numbers provided here are as per tax laws in 2021 and are subject to change.
Is Gambling your Profession? Tax Works Differently!
If you happen to gamble as a profession, then your winnings are taxed differently. In this case, any gambling winnings are considered regular earnings and are subject to income tax. The income tax rate will be determined by the total annual income.
While reporting your gambling winnings, as a professional gambler, you will declare them as self-employed earnings on Schedule C. Gambling-related losses can also be reported as professional expenses, also on Schedule C.
What about State Level Taxes?
In certain states, gambling winners must declare their earnings in the state where they were won.
Regardless of where you live, the majority of states tax all income gained in their jurisdiction. Furthermore, your resident state will compel you to disclose the wins while giving you a credit or deduction for taxes paid to a non-resident state.
How exactly state taxes will apply to your gambling winnings will depend on the state law in your resident state as well as the state where you won.