Understanding Gambling Wins Taxes: A Comprehensive Guide
Did you just win big at the casino? Whether you strike it rich on the slot machines, win some money at the gaming tables, or scoop the jackpot in a regional lottery, you will likely need to pay taxes on those winnings.
The exact rate of taxes on casino winnings varies, as does whether or not some of that money will be withheld by the casino. There are also offset losses and other variables to consider, and we’ll cover all of those things here, helping you to better understand gambling wins taxes.
Gambling Wins Taxes in the US
Gambling winnings have always posed a unique proposition to revenue services. On the one hand, they are chance-based winnings deep-rooted in the travel and hospitality sector. Winners don’t work for their money; there is no guarantee they will get a return, and the average gambler loses more than they win.
At the same time, however, there are professional gamblers out there who make a living at the card tables, generate a consistent return, and usually end each tax year with some kind of profit. In many countries, the answer is to avoid taxing gambling winnings completely and focus instead on taxing the casinos and sportsbooks that generate the big bucks. However, in the US, all citizens are required to pay tax on their winnings.
Whether you’re playing online blackjack games, buying lottery tickets, playing land-based card games, or even winning game shows and other televised events, you must declare your winnings.
It’s not all bad news, though, as you can also deduct your losses from those winnings, thus reducing your tax liability.
What is the Gambling Winnings Tax Rate?
There is no fixed tax rate for all gambling winnings in the United States. However, if you win beyond a certain amount in a gambling establishment, they will hold 24% of your winnings for federal taxes. They will also give you a form (IRS Form W-2G) so you can record the transaction and eventually pay the right amount of tax.
The amount could be 24%; it could be a lot more. But in the most recent taxed year, you would need to have earned over $100,000 to enter that tax bracket. If you make less than this, you could pay less tax on your winnings.
What Gambling Income is Taxed?
All gambling winnings are subject to tax in the United States, whether it’s taxes on slot machine winnings from the online casino at BetUS or taxes on lottery wins. Your annual losses (see below) will dictate exactly how much you must pay, but every win should be recorded.
What About Non-Cash Prizes?
If you turn casino promotions and bonuses into real money that you withdraw to your account, you must declare that income. If you win a prize such as a luxury item or a vacation, assess the price based on the current market value and then report it on your tax return.
Do Professional Gamblers Pay Income Tax on Gambling?
Taxes on gambling winnings, poker winnings, and sports betting are different from professional gambling.
If you gamble for a job, you can deduct your gambling losses as regular business expenses on Schedule C. If you are not sure about this profession or need some guidance, we recommend getting in touch with a legal professional.
Offsetting Losses for Taxes on Gambling Winnings
You don’t pay tax on all your winnings. The IRS is only interested in taxing the profit. So, if you win $50,000 in a lottery and then proceed to lose $40,000 throughout the tax year, you will pay tax on the remaining $10,000. If you lose all your winnings during that period, you won’t be charged anything as far as this section of your tax return is concerned.
Your deductible losses cannot exceed your total gambling winnings, though, and they must also be itemized on your tax return.
Summary: Gambling Wins Taxes in the US
US tax laws are much more straightforward than they seem. They are also very reasonable, as you are charged tax based on your existing tax rate, and not a set rate that applies across the board.
Need more information about gambling taxes, casino games, and the ins and outs of gambling, take a look at our online casino guide. We also recommend hiring a tax professional if you are new to all of this and have a lot of income and expenses to report. They can answer any questions that you have and ensure that your taxes are filed correctly and you don’t end up overpaying for anything.
Commonly Asked Questions
Do Americans pay tax on gambling wins?
Yes, Americans must pay taxes on all winnings claimed through online and offline sportsbooks and casinos. The exact rate differs as per their current income tax rate.
How do I get tax back from US casino winnings?
If you’re a non-US citizen and your funds have been withheld in a casino, you will need to initiate a tax refund. Simply submit Form W-7 to the IRS to get a Taxpayer Identification Number and then file a tax return.
Are gambling winnings taxable in Canada?
In Canada, gambling winnings are only taxable if the player is a professional, and thus gambles for a living. It’s not all bad news for professional gamblers though, as they have access to deductions and other benefits that allow them to operate their sole trader gambling enterprise just like a business.
Will banks refund gambling?
If you have been scammed by a legitimate casino, you should be able to get your money back. If you have been trying to skip requirements and play at sites with no licenses and very little protection for their players, your bank may refuse to initiate a chargeback. After all, while casinos and banks do everything to provide safe and secure services, they can only do so much, and can’t allocate for reckless customer behavior.
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