It’s always extremely exciting when you rake in impressive winnings when playing your favorite online casino games or when out for the night at a land-based casino. Unfortunately, though, the high that comes with a win can quickly turn into a downer if you don’t ensure that you’re on the right track regarding your taxes.
So, are casino winnings taxable? The answer, in short, is yes. The IRS considers any money that you win while logged into an online casino, or when playing in-person at a land-based gambling establishment or event, taxable income. Other forms of winnings that you’ll need to pay tax on include any winnings collected through successful sports betting, winning the lottery or winning money on a game show. Even tiny winnings from things like scratch cards need to be reported and taxed. Luckily, it’s not all bad news. Read on for details.
Are gambling losses deductible?
Gambling winnings are indeed taxable, but the saving grace is that gambling losses are deductible. If you want to be certain that you’re not paying too much (or too little!), it’s vital that you keep comprehensive records of the outcomes of your sessions whenever you play casino games. Along with an accurate gambling log, this could also mean holding onto payment slips, statements and receipts detailing how much you’ve won or lost. After all, you’ll need to supply proof of any winnings and/or losses to ensure they’re properly taxed or deducted.
What details should be included in my gambling log?
According to the IRS, your gambling log should include the following information:
- The date on which you gambled
- The type of gambling activity in which you took part
- The name and URL of the online casino or the name and address of the land-based casino or gambling event
- The names of other people taking part, if applicable
- How much money you won or lost
What is Form W-2G and when is it necessary?
Form W-2G is the document dedicated to reporting how much you’ve won through your gambling activities and how much, if any, has already been withheld for tax purposes.
Usually, Form W-2G is sent to you by the casino or event organizer responsible for paying out any significant winnings. You can expect to receive this form before the end of January following the year in which you won the money in question.
Generally, you can expect to receive Form W-2G if you won over $5,000 while playing the lottery, sweepstakes or a casino table game such as poker; over $1,200 while playing bingo or a slot machine; or over $1,500 while playing keno. You’ll also receive the form if the casino or event organizer withheld any tax (usually 24%) from your winnings (which is expected to happen in most of the favorable outcomes mentioned above.)
Remember, not everyone who plays casino games will receive and need to complete and submit Form W-2G, but everyone who takes part in any form of gambling with real money needs to report their winnings on their tax return. If you don’t receive Form W-2G, you’ll need to report your winnings as “Other Income” on Form 1040.
Did you know? Any money won from playing a skill-based casino game, like poker or blackjack, usually doesn’t involve withheld taxes – although you’ll still need to report these winnings in your return!