When you win at the casino, you’re probably more interested in thinking about how you’re going to spend the money than you are in paying taxes. However, if you want to avoid problems with the Internal Revenue Service (IRS), you should be paying taxes on all of your casino winnings, no matter how big or small they are, or risk being audited and fined.
When it comes to gambling winnings that exceed $1,199 on video slots or poker, you must file your gains with the IRS to ensure you comply with federal tax laws. Any time you score a win over this amount on one of these games, the casino will issue you a form called a W-2G that includes all the information you need to include on your tax return.
Table games like baccarat and roulette are exempt from the requirement to issue this form, but you are still responsible for keeping track of anything you win and reporting it at tax time.
Paying State and Federal Taxes on Gambling Winnings
When you win money at the casino, you are legally obligated to report the cash in the same way you report earnings from other sources such as a job. When you win $1,199 or less on a slot or video poker machine, is it your responsibility to keep track of the amount of money you gain in the casino, and you should report it under “other income” on the IRS Form 1040.
If you win anything over $1,199 on a machine in the casino, the casino will provide you with a special tax form called a W-2G that you should retain for reference when filing your taxes.
Here are a few more scenarios where the casino should issue a W-2G on your win:
- Keno: $1,500+
- Poker Tournament: $5,000+
When it comes to casino table games such as blackjack and craps, the casino has no way of tracking how much money you win in a single session, so even if you win a total that exceeds the threshold to receive a W2-G, the casino can’t issue the form, making the following games exempt from the W2-G requirement:
- Blackjack
- Craps
- Roulette
- Baccarat
Even though the casino won’t issue tax forms on these games, you are still required to report any profits to the IRS as additional income.
Deducting Losses from Casino Winnings
If you choose to itemize your deductions on the IRS Form 1040, you can deduct your losses from casino winnings to minimize your tax liability. If you choose to go this route, you must keep a detailed diary or journal with accurate numbers and receipts or other official records to back every entry up. The federal government prohibits deducting losses that exceed the number of casino winnings, so you can only claim up to the same amount as you won in a calendar year.
Taxes and Non-Cash Prizes
If you win a prize like a car or a trip to the casino, the IRS wants to know about it. Even though these prizes don’t always come with a cash prize, they are still considered taxable income. When you file prizes on your taxes, you must claim the dollar amount that the prize is worth if it were being sold on the open market, which is called the fair market value.
Casinos do not issue a W2-G form on non-cash prizes. It is your responsibility to determine the fair market value and claim the amount under “other income” on your IRS Form 1040.
The Bottom Line
No matter how much you win at the casino, you are legally required by the IRS to pay taxes on it. If your winnings exceed a certain amount, the casino will issue you a form W2-G to go with your year-end taxes. If not, you are required to keep an accurate record of your winnings for reporting at the end of the year.
Implementing healthy financial habits at the casino is the best way to stay out of trouble with the federal government. When exercised properly, these habits can save you from an audit or a tax bill with penalties from the IRS.
With regards to online sportsbooks, each state has different regulations, so we suggest to visit the page for each state to be aware of the requirements depending on your state of residence.
