Do you have to pay taxes on casino winnings in the US?
Here at AmericanCasinoGuide.com, we aim to ensure that our readers remain informed about any information that relates to gambling and taxes on casino winnings. Despite this, the information on this page is meant for informational purposes only, so you are highly encouraged to seek professional tax, legal, or accounting advice.
There are several top US casinos that offer some of the best welcome bonus offers and seasonal promotions. But while you are enjoying your favorite casino games and cashing in your winnings, you must remember about taxes on casino wins.
When it comes to taxes, no entity is as strict as the IRS. In fact, the US is notorious in the worldwide gambling industry for being very thorough when it comes to gambling and taxes.
Everything that players receive as winnings from an online casino is subject to gambling taxes. The actual amount of taxes on casino wins may vary on the basis of the amount won and the player’s location, but every US citizen will regain subject to US tax laws.
There have been several professional online casino players that have failed to report their income to the IRS, which resulted in them being banned from top US casinos. It is always your responsibility to self-report any casino winnings, so you should read through this page so that you become aware of your tax obligations.
What winning amount do you have to report in the US?
There are different types of online games that the IRS classifies as being eligible for taxes on casino wins. These include:
- Online slots
- Online poker and poker tournaments
- Online casino games such as baccarat, blackjack, and roulette
- Live casino games
- Lotteries
- Sweepstakes
- Bingo
Some exceptions are made, as we describe in detail below. Each time a player makes a win at a US online casino, the payer of the winnings will provide you with a Form W-2G if the following criteria are met:
- $600 or more if the amount won is at least 300 times the wager placed. The payer also has the option to reduce the winnings by the wager.
- $1,200 or more (not reduced by wager) in winnings from online slots or bingo
- $1,500 or more in winnings (reduced by wager) from keno
- More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament
- Any winnings subject to a federal income-tax withholding requirement
Any winnings that are reported to the IRS in a Form W-2G are subject to federal gambling taxes at a flat rate of 24%. Players that do not provide the payer with a tax identification number will still be subjected to a withholding tax rate of 24%.
Online Slots and Bingo
| Value of Winnings | Withholding of Tax | Tax amount |
|---|---|---|
| Up to $1,200 | No, winnings must be declared by the player | 24% |
| More than $1,200 | Yes, tax withheld by payer or casino | 24% |
Players will be provided with a Form W-2G if they receive $1,200 or more (not reduced by wager) in winnings from online slots or bingo.
In general, when a player wins more than $5,000 on a wager and the payout is at least 300 times the initial bet placed, the IRS will request the payer to automatically withhold 24% as taxes on casino winnings.
However, special rules do apply for slots and bingo as winnings may not be subjected to tax withholding if certain circumstances are met. This is when the payer of these winnings may need to be provided with a social security number to avoid withholding.
How much money is that?
So, if a player lands a $2,000 win at their favorite online slot game, they will be obliged to pay $480 in taxes on casino wins to the IRS, leaving a net win of $1,520.
Poker
| Value of winnings | Withholding of Tax | Tax amount |
|---|---|---|
| Up to $5,000 | No, winnings must be declared by the player | 24% |
| More than $5,000 | Yes, tax withheld by payer or casino | 24% |
When it comes to online poker and poker tournaments, taxes on casino winnings can differ on the basis of whether a player is a casual one who have a fixed source of income outside of gambling, or a professional player whose main source of income is poker.
Players that win less than $5,000 in one poker session on top of their buy-in will not be subjected to tax withholding and will not be provided with a Form W-2G from the casino – but this still will not exempt you from gambling taxes.
Should you have a very good session and walk away with more than $5,000 (reduced by wager or buy-in), the casino will withhold 24% of your winnings and then provide you with a Form W-2G which you must include when filing your income tax return. Some online casinos may charge up to 28% in taxes if you do not provide them with your tax ID number.
What about Poker Professionals?
Our guide to gambling and taxes would not be complete if we did not also include a small section about professional poker players! In fact, those players whose main source of income is their gambling activity, they are considered as being self-employed by the IRS.
This creates a range of benefits, starting from a progressive tax rate that will not be the same as the flat 24% imposed on winnings by casual poker players. In order to maximize from this progressive tax rates, poker pros must be:
- Very diligent in keeping a record of all winnings, prizes, or pots from tournaments
- Record all expenses incurred in pursuit of your poker profession
- In contact with a certified wealth manager to assist them in ensuring all their affairs are in order
How much money is that?
Casual poker players can walk away with quite a substantial amount of winnings when playing at their favorite US online casino. Let us take an example where the buy-in for a Texas Hold’em poker table is set at $300.
A player that wins a total of $5,200 will have gross total winnings of $4,900 minus the buy-in. This amount is not subject to income tax withholding, so they will be responsible for reporting the $4,900 when filling their income tax return.
If a player wins a total of $6,000 from a session, their gross total winnings after removing the buy-in will be $5,700. Since this passes the threshold, 24% taxes on casino winnings is withheld by the casino. The player will receive a net sum of $4,332 as their winnings, and their Form W-2G.
Games of chance
| Value of winnings | Withholding of Tax | Tax amount |
|---|---|---|
| Up to $600 | No, winnings must be declared by the player | 24% |
| More than $600 | Yes, tax withheld by payer or casino | 24% |
| More than $5,000 (sweepstakes and lotteries) | Yes, tax withheld by payer or casino | 24% |
When it comes to gambling and taxes, the IRS classifies the majority of online casino games and being games of chance. This term coves games such as roulette, blackjack, baccarat, craps, live casino games, and even other major games such as sweepstakes and lotteries.
In terms of gambling taxes, all of these games of chances are subject to a flat rate of 24%. Tax withholding can also be applied for these games as per the following conditions:
- More than $5,000 won from sweepstakes or lotteries
- More than $600 or any other wager whose proceeds are equal or greater than 300 times the bet amount placed
How much money is that?
Let us take an example of a player who enjoy playing different blackjack variants at his favorite online US Casino.
In the first example, the players makes a side bet of $10 for a Perfect Pair. He wins this bet, and receives a payout of roughly $250 at 25:1 odds. Since the total of these winnings is less than $600 and does not meet the wagering requirements, there is no withholding of tax at the casino. The player will be responsible for reporting their own taxes on casino wins.
In the second example, this player places a $5 Super Sevens side bet in blackjack, and ends up landing a 500:1 winning card. This means that the player has just won a total of $2,500. Since this amount is greater than 300 times the amount of the initial wager, the casino will withhold 24% taxes on casino winnings and the player will walk away with a net total of $1,900.
How and where to report your winnings in the US
As we have already discussed in this guide, gambling and taxes are taken very seriously by the IRS. Players are obligated to report any income from gambling as this is taxable. In fact, the law clearly states that even if a player buys a $1 scratch card and wins $20, they must report the $19 as they are liable for gambling taxes!
There are two main ways for reporting taxes on casino wins:
- Players can have the winnings payer or casino pay withholding taxes, and then receive a copy of the Form W-2G which they submit with their income tax returns.
- Players must report all casino wins when tax is not withheld by the payer.
No matter the scenario, players should always file their taxes diligently and on time with the IRS. It is always a good idea to also keep some extra money in the bank in the case where taxes are not withheld by the casino – the last thing any US casino players needs is a hefty fine!
Tips for Professional Poker Players
Professional poker players will be registered as self-employed with the IRS, which means that they can treat poker as their main source of income.
When submitting tax returns with the IRS, these players can include all business expenses on Schedule C. These expenses can include anything that related to the pursuit of making money, with things such as :
- Airfare and accommodation when going to poker tournaments
- Technical equipment for playing online poker from home
- Operational expenses such as internet and office furniture
In addition, poker pros are always advised to keep track of all their winnings and buy-ins during sessions, as it is always prudent to be organized when calculating how much tax is owed to the IRS.
Conclusion
There is a reason why a lot of people say that death and taxes are two things in life that no one can avoid. A lot of online casino players in the US may be confused about the laws on gambling taxes or the taxes on casino winnings they should be paying.
So before you claim one of these top US casino bonuses, you should remember that all casino winnings are taxable in the US, so seek professional advice should you be unsure about how much you should be paying.