Any money you win from gambling in the US is considered taxable income by the IRS. Gambling income doesn’t just include card games and casinos: it includes winnings from racetracks, game shows, lotteries, and even bingo.
There are special rules that apply to gambling income, and also strict recordkeeping requirements that must be adhered to. However, you may be able to deduct gambling losses in some cases.
A good way to look at it is to think that gambling income is almost always taxable income. This includes cash and the fair market value of any item you win. By law, winners must report all of their gambling proceeds on their federal income tax returns.
Gamblers might receive one or more “Form W-2G”, depending on the amount of the winnings in question. This form is used to report the amount of your winnings and also the amount of tax that was withheld, if applicable. Players will need these forms to prepare their tax return. Players must remember to report all gambling winnings.
Gambling winnings on slots and table games over $1,200 are generally subject to a flat 25% tax. However, for the following, gambling winnings over $5,000 are subject to income tax withholding:
- Any sweepstakes, wagering pool (including poker winnings), or the lottery
- Any other wager (if the proceeds are at least 300 times the amount of the bet)
If a non-cash prize is won, such as a car or a vacation, then the winner will be responsible for paying taxes on the fair market value of the prize.
Depending upon the amount a players has won and the type of gambling, the payer may be required to withhold income taxes. In general, 25% of the amount is required to be withheld. In some cases, 28% is required instead. If tax is withheld from gambling winnings, then a W2-G form is provided.
All legalized and regulated New Jersey and Delaware online casinos are obliged to report any jackpots or single slots winnings over $1,200. In New Jersey, all gambling winnings are subject to New Jersey Gross Income Tax. Players must be able to substantiate gambling losses at their online casino to offset any winnings they report on their annual tax returns.
In regards specifically to online poker, there are two ways to declare your taxes. Most players will enter the income under miscellaneous income. However, a player with a history of winning can register themselves as a professional player. Schedule C tax form then comes into play, which is the same tax form used by self-employed business owners. More information can be found on the IRS homepage.