Gambling Winnings and Taxes

Money that you may have won throughout the tax year playing the state lottery, bingo, keno, slot machines, and other forms of gambling is considered income that should be reported on your income tax return each year.

In the event your winnings are not subject to withholding, you are still required by law to disclose and report them. Taxpaying gamblers can itemize their deductions, claiming any gambling losses up to the amount of their winnings, however.

The basics of the Federal law are as follows, but each state may also have individual laws, rules, regulations, and requirements. It is important to check with your state Department of Revenue to determine what else you may be required to claim, or what you can itemize.

Gambling winnings that exceed $5,000 are subject to income tax withholding when they were won from a sweepstakes, a poker tournament, a wagering pool, the lottery, or any other wager if the gain is at least 300 times the original bet.

Therefore, if you played the lottery for $15, and won at least $5,000, those proceeds are taxable as income because it meets the minimum of $5,000, and the winnings are also more than 300 times 15.

The above applies to all forms of payout, not just cash. Gambling winnings that are not paid out in monetary form, such as winning some type of property, will be assessed for fair market value. The fair market value becomes the amount of your gain.

Most gambling winnings that come from bingo, keno, or slot machines are not subject to income tax withholding on a federal level. You will probably need to provide identification and your social security number to avoid any income taxes being withheld. If not, you may be required to pay an estimated tax.

Many states that allow casinos to operate in the state do tax winnings as an additional form of revenue. Player services at your favorite casino should be able to inform you of any state laws pertaining to any money or property you may have won.

At the end of the tax year, you should receive a W2-G if the payer has withheld any taxes from your gambling winnings. If tax was not withheld, but you still have gambling winnings, you should receive a 1099-MISC.

If your win or loss was from a casino or other entity, you can request a Win/Loss Statement from that company for your tax purposes. Even if the Win/Loss is not reportable on your income tax, you are still entitled to the statement each tax year.

If you ever find yourself a big winner after gambling, and do not provide your social security number to the payer, they may be required to withhold 28% of the winnings for taxes. This rule applies to $1,200 or more from slot machines or bingo, $1,500 or more from keno, and other gambling winnings in excess of $600.

The $600 minimum includes any special prizes you may win at a casino or other gambling establishment, such as televisions or a new car.

Tax laws change often, and state tax laws will vary without any certainty. It is important, if you are a gambler, to state up to date on what is expected, and required, of you as a gambling winner.

sources:

http://www.irs.gov/taxtopics/tc419.html

http://www.irs.gov/publications/p525/index.html

http://www.irs.gov/publications/p505/ch01.html#d0e3828