on

Where Are Gambling Winnings Reported
Tax Limit On Gambling Winnings

Taxes are probably the last thing on your mind during an exciting gambling session. However, they inevitably come up following a big win or profitable year.

When you file your taxes, you’ll report your winnings (everything you won minus the bet you placed) onto line 21, “Other Income,” on your Form 1040. That W2-G we mentioned above will have the exact numbers. If you didn’t receive a W2-G, you’re still required to report the income on your tax return. Claiming your gambling losses. One itemized deduction that survived tax reform was the ability to deduct your gambling losses. You can tally your losses on the 'Other Miscellaneous Deductions' section of Form 1040 Schedule A. Note, however, that your bad betting luck only goes so far. You can only use your gambling losses to offset, perhaps zero out, your winnings.

From there, the proper gambling forms will be filed along with your 2020 Tax Return. Remember that, even if you do not get a Form W-2G, you must report all gambling winnings on your return. Gambling winnings include, but are not limited to, money or prizes earned from: Casino games; Slot machines. Keno. Poker tournaments; Lotteries; Sweepstakes. You must report the full amount of your gambling winnings for the year on Form 1040 regardless of whether any portion is subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings. Gambling losses for the year can be deducted on Schedule A. In Drake18, the amount of gambling winnings flows to line 21 of Schedule 1 and then the sum of lines 10-21 flows to Form 1040, line 6. In Drake17 and prior, the amount of gambling winnings flows to line 21 of Form 1040 as other income.

Where Do I Put Gambling Winnings On 1040

You may have two main questions at this point:

Do I need to pay taxes on my wins?
If so, how much do I have to pay?

The following guide discusses whether your gambling wins are taxable and other important topics regarding this subject.

The Short Answer Is Yes

I’ll cut right to the chase: yes, you do need to pay federal taxes on gambling winnings in the United States. This is especially true when you net a big win and receive a W-2G form.

According to the IRS, a gambling establishment should issue a W-2G when you win an amount that’s subject to federal income tax withholding (24% of win).

Slot machines present a famous example of when you’ll receive a W-2G form after winning so much. Casinos must issue a form when you win a prize worth $1,200 or more through slots or video poker.

As for the second point, a sportsbook or racetrack must withhold federal taxes when you win a bet worth 300x your initial stake. If you wager $5 and win $3,000, for example, then the bookmaker will issue a W-2G form and withhold $720 (24%).

Here’s a broader look at the W-2G and tax withholding threshold for different types of gambling:

$600+ through sportsbooks and racetracks (provided it’s 300x your stake).
$1,200+ through a slot machine, video poker machine, or bingo game.
$1,500+ through keno.
$5,000+ through a poker tournament.

All Winnings Are Subject to Taxation

Technically, you’re supposed to report any gambling winnings—big or small. Even if you win $20 in an office betting pool, the IRS wants to know about it.

If you want to stay above board, then you should report all wins on Form 1040 (under “other income”). As I’ll cover later, you can deduct losses from winnings as well.

Furthermore, any amount that’s withheld by a casino, poker room, sportsbook, or racetrack is deducted from what you owe. Gambling establishments keep 24% of a win when they do withhold money.

W-2G Forms Don’t Apply to Table Games

You’ll receive a W-2G when earning big wins through most types of gambling. However, casino table games are an exception to the norm.

Unlike a jackpot game (e.g. video poker) or a poker tournament, casinos have no idea how much money you start with in a table game. Therefore, they can’t really determine when you do and don’t experience big wins.

Examples of table games that are exempt from W-2G forms include:

Where Are Gambling Winnings Reported

Baccarat
Blackjack
Caribbean stud
Craps
Roulette
Three-card poker

The IRS still expects you to pay taxes on profits earned through table games. Again, though, the casino can’t issue a W-2G because they can’t tell how much money you’ve actually won.

Some States Tax Gambling Winnings

Most states tax your income, including gambling winnings. Depending upon where you live, you’ll probably need to pay taxes to both the IRS and your state.

For Example:

Michigan features a 4.25% flat income tax. The Wolverine State expects you to pay this same 4.25% rate on gambling wins.

West Virginia, on the other hand, doesn’t tax your winnings. Casinos/sportsbooks in the Mountaineer State only withhold federal taxes (when necessary).

Tax Limit On Gambling Winnings

Assuming you travel to another state to gamble, you may have two states wanting taxes. Luckily, though, you won’t be subject to double taxation.

Instead, your home state will give you credit for whatever taxes are paid to the state where the winnings occurred.

Can You Deduct Losses?

You can deduct gambling losses from winnings. However, these deductions are itemized rather than standard deductions.

Here’s an example to explain:

You win $5,000 through sports betting.
You lose $4,500.
You must report the full $5,000—not $500 (5,000 – 4,500)—under other income.
Meanwhile, the $4,500 is reported through various itemized deductions.

In short, itemized deductions are expenses that reduce your taxable income. The standardized variety includes flat-dollar, common deductions.

You may be able to save more money through itemized deductions. However, standard deductions are easier to deal with and also have the potential to save you more money.

Regardless, you must use itemized deductions when dealing with losses. This means spending more time on your tax returns or working with an accountant.

Keep in mind that you won’t receive a tax refund for gambling losses. Instead, you can only deduct an amount equal to your winnings each year. If you win $3,500, for example, then you can’t deduct more than $3.5k and expect a return.

Keep Records on Wins & Losses

The IRS may take your word at face value when it comes to gambling. Of course, they also have the ability to audit you when they deem it necessary.

That said, you don’t want to guestimate on your wins and losses. Instead, you want proof through the form of records.

Journals offer a great way to record your gambling activities. You can log the following for each entry:

Date of gambling session
Location of the establishment
Game played
Starting bankroll
Ending bankroll

Such entries don’t guarantee you’re being honest. However, they at least show the IRS that you’re making a legitimate attempt at recordkeeping.

You can take your recordkeeping efforts even further by holding onto any other relevant documents. Betting slips, winning tickets, canceled checks, bank statements, W-2G forms, and anything else of relevance are all worth saving.

What Happens If You Don’t Report Gambling Winnings?

The IRS fully expects you to report gambling winnings and especially annual profits. They don’t take kindly to you failing to report these wins.

Of course, you’re unlikely to draw an audit for winning a $25 sports bet. You stand a higher chance of being audited, though, if you win enough for a W-2G form.

In this case, the casino/sportsbook/racetrack also sends a copy of the from to the IRS. The latter features reliable software that can match up your reported income with docume

Where Do I Put Gambling Winnings On 1040