The Washington Independent
The Washington Independent
All there is to know about gambling winnings and taxes in the USA

All there is to know about gambling winnings and taxes in the USA

Jun 17, 2021 10:11
Amandeep Coleman

Table of Contents

Gambling income in the USA and the IRSWhen is a W-2G form requiredDeduction of gambling expenses

As opposed to some countries, the residents of which are not required to pay taxes on the winnings they have accumulated from gambling activities, this is not so in the USA where any money you earn is regarded as a taxable income.

Most researches show that around 66% of Americans engage in some form of gambling, and the share of people who take part in such activities keeps on growing because of the changing stances on gambling of some states. As a result, a number of regulations were set forth to guarantee that the winnings and losses from gambling activities will be properly overseen.

In order to make sure that they will not infringe the law unwittingly and ensure that they will not have problems down the line, gambling enthusiasts should understand how the winnings they have earned are taxed, and do so just read ahead.

Gambling income in the USA and the IRS

Whether you have just bought a scratchcard or you have traveled to one of the gambling hotspots where you have bagged a healthy prize does not make any difference for the government. Perhaps, the question you might be asking yourself at this point is what description of gambling income the International Revenue Service (IRS) has provided.

Founded back in 1862, the Internal Revenue Service(IRS) is the agency, which is tasked with the responsibility to administer laws and collect taxes on gambling winnings in the US.

It is important to point out that gambling income is a term, which is used to describe not only the winnings you have earned while playing casino games but also winnings amassed while playing bingo, game shows, lotteries, as well as when betting on racetracks. No matter what the case is, you will be required to painstakingly keep a record of your winnings. As for non-cash prizes, winners will be required to report them as well, but what they should be mindful of is that their monetary value will be taken into consideration.

What big winners might be happy to hear is that according to the regulations that are currently in place, gambling taxes are not progressive, which is not the case with income taxes. Formerly, the withholding tax rate was 25%, but as of 2020, it is set at 24%.

What is important to note, however, is that recreational and professional gamblers are treated differently, and if gambling is not your profession, you will be required to mark your winnings as other income and use Schedule 1. Gamblers who earn a living from such activities will be required to report them as self-employment income. They should be reported on Schedule C, and you will face a self-employment tax, state income tax, as well as federal income tax.

As for non-residents of the USA, they will be taxed a flat fee of 30% and will be required to report the winnings they have earned using Form 1040NR. Normally, non-residents of the USA are not permitted to deduct gambling losses, but this does not apply to gambling enthusiasts from Canada.

When is a W-2G form required

As for the reporting of your gambling winnings, you will be required to fill in a W-2G form which is the official document you will receive from the payee or the gaming operator. The establishment or the payee will be required to report the winnings you have come by, together with the tax withheld.

Players will be prompted to fill in this form in the event that they have wagered on slots or bingo, and their winnings exceed $1,200. As for keno, the winnings of players must be higher than $1,500. The operator will be required to provide you with such a form if you have taken part in a poker tournament, and your winnings are greater than $5,000. It is important to note that the buy-in and the stakes you have placed are reduced from that amount.

On the occasion that your winnings are worth $600 or more and this amount is 300 times larger than the wager you have made, and you have not played bingo, slots, keno, or taken part in a poker tournament, you will face a federal income tax of 24%. Please note that in the above-mentioned scenarios, a tax will no be withheld.

If the prize is won by two or more people, however, they will be required to fill in Form 5754.

Deduction of gambling expenses

While filling in the form, you will be allowed to deduct your losses, but it is essential to remember that this amount cannot be greater than your winnings. This also applies to the expenses for the bets you have placed, including the lottery tickets you have purchased and the amount you have put on a stake.

Under the Tax Cuts and Jobs Act, you are not permitted to remove the losses you have incurred from the winnings you have accumulated and report the remaining amount as winnings. What you need to do instead is fill in two separate forms, one for the winnings and another one for the losses.  Besides, under the provisions of the Tax Cuts and Jobs Act, your winnings cannot be greater than the losses you are trying to deduct.

In addition to this, the act points out that deducting other expenses, such as the cost of travelling, for example, is no longer allowed.

Amandeep Coleman | Amandeep had never known a moment when she wasn't reading or making up stories, having been born into a family of readers. She took out a pencil and notebook during the now-famous blizzard and started writing down one of those stories. It was there that I began my professional life. Her first book was written after several rejections and manuscripts. She is a member of many writers' organizations and has received several accolades from her peers and the publishing industry. The New Yorker recently dubbed her "America's favorite novelist".


Gambling Laws: How Canada compares to the US

Canada and the US are not just neighbors. They’re allies that share a national language, food and music. Both countries are huge in geographical size, incredibly developed and have populations with a 99% literacy rate.

How Ethereum is steadily second-most popular cryptocurrency

Cryptocurrencies have taken over the digital world with their countless advantages and ways of improving the online life of millions of users. That change started with Bitcoin and now we are taken in by Ethereum. It is more than just another cryptocurrency.

Top Altcoins offered by crypto gaming industry

Crypto casinos allow users to get access to more features than a traditional casino by enabling gambling and payments through the world’s most popular cryptocurrencies.

7 Tips to make your brand more customer-focused

Customers are undoubtedly the lifeblood of all companies worldwide, so it isn't surprising to see many businesses prioritizing them. Research indicates that about 40% of all companies have an equal focus on customer retention and acquisition to help drive long-term company growth.

6 Useful tips on how modern technologies are reshaping traditional businesses

The technological evolution in the modern workplace has been very beneficial to many businesses, and, of course, several businesses have taken advantage of this to improve their performance level and operate more smoothly. Every business needs technology; whether big, small, or medium.

What Americans need to know about online casino bonuses

It used to be that gambling in the US was severely restricted, with destinations such as Las Vegas and Atlantic City, being the key havens for people wishing to test their luck.

The Biggest Wins in Poker History

Outside of organised sport, poker is one of the most popular pastimes on the planet by players from Las Vegas to Laos and everywhere in between. One of the many reasons for poker’s popularity is the riches that the game can offer to those successful enough to consistently win the top prizes.

Top 5 publicly traded gun company stocks

For just a long time, the market for gun company stocks has indeed been completely ignored. Even so, even as the whole world becomes increasingly chaotic, firearms are mainly motivated by the demand for self-protection. This has resulted in an unprecedented rise in weapons sales throughout the US.

The industries utilising e-wallet payment methods

An increasing amount of consumer transactions are taking place over the internet, last year over 779 billion digital payments took place across the world. This figure is expected to grow by around 13 percent each year and more people enjoy the convenience and accessibility of spending money online.

Is online bingo legal in Washington state?

Online bingo is growing rapidly, with players everywhere noting the benefits of gaming from the comfort of home. Exciting, engaging, and best of all, offering a real chance to scoop the jackpot, bingo is enjoyed by millions worldwide.

6 Ways to increase the value of your home before selling it

When you are looking to sell your home, you want to make sure you sell it for a good price. Luckily, house prices normally go up over time, so you should not have any trouble selling it for more than you bought it for.

© Copyright 2021 The Washington Independent All Rights Reserved

Terms & Privacy |