Sharing Gambling Winnings. Fill out Form 5754 if two or more people are to share in the winnings. The casino will divide the winnings among the players and will subsequently report them on separate Forms W-2G to the IRS under the names of each of the winners.

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• Only gambling losses. The IRS does not permit you to simply subtract your losses from your winnings and report your net profit or loss. And if you have a particularly unlucky year, you cannot just deduct your losses without reporting any winnings. If the IRS allowed this, then it's essentially subsidizing taxpayer gambling.
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Do you like to gamble? If so, then you should know that the taxman beats the odds every time you do. The Internal Revenue Service and many states consider any money you win in the casino as taxable income. This applies to all types of casual gambling – from roulette and poker tournaments to slots, bingo and even fantasy football. In some cases, the casino will withhold a percentage of your winnings for taxes before it pays you at the rate of 24 percent.

Casino Winnings Are Not Tax-Free

Casino winnings count as gambling income and gambling income is always taxed at the federal level. That includes cash from slot machines, poker tournaments, baccarat, roulette, keno, bingo, raffles, lotteries and horse racing. If you win a non-cash prize like a car or a vacation, you pay taxes on the fair market value of the item you win.

By law, you must report all your winnings on your federal income tax return – and all means all. Whether you win five bucks on the slots or five million on the poker tables, you are technically required to report it. Job income plus gambling income plus other income equals the total income on your tax return. Subtract the deductions, and you'll pay taxes on the resulting figure at your standard income tax rate.

How Much You Win Matters

While you're required to report every last dollar of winnings, the casino will only get involved when your winnings hit certain thresholds for income reporting:

• $5,000 (reduced by the wager or buy-in) from a poker tournament, sweepstakes, jai alai, lotteries and wagering pools.
  
• $1,500 (reduced by the wager) in keno winnings.
  
• $1,200 (not reduced by the wager) from slot machines or bingo
  
• $600 (reduced by the wager at the casino's discretion) for all other types of winnings but only if the payout is at least 300 times your wager.
  

Win at or above these amounts, and the casino will send you IRS Form W2-G to report the full amount won and the amount of tax withholding if any. You will need this form to prepare your tax return.

Understand that you must report all gambling winnings to the IRS, not just those listed above. It just means that you don't have to fill out Form W2-G for other winnings. Income from table games, such as craps, roulette, blackjack and baccarat, do not require a WG-2, for example, regardless of the amount won. It's not clear why the IRS has differentiated it this way, but those are the rules. However, you still have to report the income from these games.

What is the Federal Gambling Tax Rate?

Standard federal tax withholding applies to winnings of $5,000 or more from:

• Wagering pools (this does not include poker tournaments).
  
• Lotteries.
  
• Sweepstakes.
  
• Other gambling transactions where the winnings are at least 300 times the amount wagered.
  

If you win above the threshold from these types of games, the casino automatically withholds 24 percent of your winnings for the IRS before it pays you. If you cannot provide a Social Security number, the casino will make a 'backup withholding.' A backup withholding is also applied at the rate of 24 percent, only now it includes all your gambling winnings from slot machines, keno, bingo, poker tournaments and more. This money gets passed directly to the IRS and credited against your final tax bill. Before December 31, 2017, the standard withholding rate was 25 percent and the backup rate was 28 percent.

The $5,000 threshold applies to net winnings, meaning you deduct the amount of your wager or buy-in. For example, if you won $5,500 on the poker tables but had to buy in to the game for $1,000, then you would not be subject to the minimum withholding threshold.

It's important to understand that withholding is an entirely separate requirement from reporting the winning on Form WG-2. Just because your gambling winning is reported on Form WG-2 does not automatically require a withholding for federal income taxes.

Can You Deduct Gambling Losses?

If you itemize your deductions on Schedule A, then you can also deduct gambling losses but only up to the amount of the winnings shown on your tax return. So, if you won $5,000 on the blackjack table, you could only deduct $5,000 worth of losing bets, not the $6,000 you actually lost on gambling wagers during the tax year. And you cannot carry your losses from year to year.

The IRS recommends that you keep a gambling log or spreadsheet showing all your wins and losses. The log should contain the date of the gambling activity, type of activity, name and address of the casino, amount of winnings and losses, and the names of other people there with you as part of the wagering pool. Be sure to keep all tickets, receipts and statements if you're going to claim gambling losses as the IRS may call for evidence in support of your claim.

What About State Withholding Tax on Gambling Winnings?

There are good states for gamblers and bad states for gamblers. If you're going to 'lose the shirt off your back,' you might as well do it in a 'good' gambling state like Nevada, which has no state tax on gambling winnings. The 'bad' states tax your gambling winnings either as a flat percentage of the amount won or by ramping up the percentage owed depending on how much you won.

Each state has different rules. In Maryland, for example, you must report winnings between $500 and $5,000 within 60 days and pay state income taxes within that time frame; you report winnings under $500 on your annual state tax return and winnings over $5,000 are subject to withholding by the casino due to state taxes. Personal tax rates begin at 2 percent and increase to a maximum of 5.75 percent in 2018. In Iowa, there's an automatic 5 percent withholding for state income tax purposes whenever federal taxes are withheld.

State taxes are due in the state you won the income and different rules may apply to players from out of state. The casino should be clued in on the state's withholding laws. Speak to them if you're not clear why the payout is less than you expect.

How to Report Taxes on Casino Winnings

You should receive all of your W2-Gs by January 31 and you'll need these forms to complete your federal and state tax returns. Boxes 1, 4 and 15 are the most important as these show your taxable gambling winnings, federal income taxes withheld and state income taxes withheld, respectively.

You must report the amount specified in Box 1, as well as other gambling income not reported on a W2-G, on the 'other income' line of your IRS Form 1040. This form is being replaced with a simpler form for the 2019 tax season but the reporting requirement remains the same. If your winnings are subject to withholding, you should report the amount in the 'payment' section of your return.

Different rules apply to professional gamblers who gamble full time to earn a livelihood. As a pro gambler, your winnings will be subject to self-employment tax after offsetting gambling losses and after other allowable expenses.

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Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

This article was fact-checked by our editors and reviewed by Christina Taylor, MBA, senior manager of tax operations for Credit Karma Tax®.

Betting on sports is part of the fun for many sports fans — even if their wagering hasn’t always been technically legal.

Until a May 2018 U.S. Supreme Court decision opened the door for every state to legalize sports betting, just four states allowed wagering on sports — Nevada, Delaware, Montana and Oregon. Legality, however, hasn’t stopped Americans from betting on sports. In fact, the American Gaming Association estimates that Americans spend more than $150 billion a year on illegal sports betting.

Since the Supreme Court’s ruling, New Jersey, Pennsylvania, West Virginia, Mississippi and Rhode Island have legalized sports betting. And at least 14 other states are considering laws to permit wagering on sports.

But when you gamble on sports, it won’t matter to the IRS if your winnings came from a legal bet or from one that’s off the books. Your winnings are taxable income either way.

If you plan to do some wagering in a state that’s legalized sports betting, it’s important to understand how tax on your winnings will work. Let’s take a look at how the IRS treats gambling winnings of any kind.

Sports-betting winnings are taxable income

The big question for sports gamblers: Are your winnings taxable income? As we said above, the answer is yes.

“Gambling winnings are fully taxable and you must report the income on your tax return,” the IRS says. “Gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips.”

Although sports betting isn’t one of the examples, it’s still covered by “gambling winnings.”

Whether sports betting is legal in the state where you place your bet doesn’t matter to the IRS. If you win, you have taxable income, which should be reported when you file your tax return.

These rules apply only to casual sports bettors. If you’re a pro — “in the trade or business of gambling,” as the IRS puts it — different rules apply.

How much tax you’ll owe depends on your personal tax situation and tax bracket.

You might also owe state income tax on any money you win from betting on sports, depending on which state you live in. For example, Nevada doesn’t have a state income tax. But Maryland does, and it considers winnings from gambling taxable income. If you win money betting on sports, check with your state to see if it taxes gambling winnings.

Form W-2G: Evidence of your sports-betting win

So you win a couple thousand bucks betting on your favorite sports team. How will the IRS know if you don’t tell it? Well, whomever you won the money from — a casino, racetrack, etc. — is supposed to report your winnings to the IRS on Form W-2G. The form tells the IRS some important information, including …

• Contact information for the payer who awarded you the winnings, including phone number, address and federal tax identification number
• Your name, address and taxpayer identification number
• How much you won
• When you won it
• What kind of wager you made
• And how much, if any, federal and state income tax the payer withheld from your winnings

Generally, the payer has to report your winnings if …

• You won $1,200 or more from a bingo game or slot machine
• You raked in $1,500 or more at keno
• Your poker victory tops $5,000
• You won $600 or more and your winnings are at least 300 times the amount of your bet (bingo, slots, keno and poker are exceptions to this rule)
• The payor withheld federal income tax on the winnings

Penalties for not reporting sports-betting income

Of course, the IRS wants you to report all your taxable income, and if you don’t you could face penalties and interest on any tax you owed but didn’t pay.

Generally, the penalty for not paying income tax that you owe is 0.5% of the unpaid tax. That rate is assessed monthly until you pay the tax you owe. Unpaid tax and penalties typically accrue interest, too — 5% compounded daily from the due date of your tax return to the date when you actually pay in full the balance of any tax, penalties and interest you owe.

However, if you’re caught intentionally omitting income — like gambling winnings — from your tax return in order to avoid paying tax on that income, it could mean additional penalties. According to the tax code, trying to “evade or defeat” tax you owe on income you’re required to report could be a felony with fines of up to $100,000 for individuals or five years in prison. Plus, people convicted of tax evasion can be held responsible for the costs of prosecution.

Lose a sports bet? It might be deductible!

Just as sports-betting winnings are considered taxable income, losses may be tax-deductible if …

• You itemize your deductions
• You keep detailed records of your winnings and losses

“To deduct your losses, you must keep an accurate diary or similar record of your gambling winnings and losses and be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses,” the IRS says.

Any losses you deduct cannot exceed winnings that you report when you file your return. For example, if you reported winnings of $5,000, you could deduct losses only up to that amount. Additional losses would not be deductible. And if you lost $5,000 but didn’t win anything, you wouldn’t be able to deduct those losses at all.

If you’re eligible to deduct your sports-betting losses — or any other gambling losses — you’ll do so on Schedule A, Line 28, “Other Miscellaneous Deductions.”

Bottom line

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More than a quarter of Americans like to bet on football, 21% are interested in betting on baseball or basketball, and 20% would put some money down on a hockey game, according to Nielsen Sports. If you’re a fan of sports wagering, it’s important to understand that tax on sports betting is nothing new.

The IRS has always considered gambling winnings taxable income, and it expects you to report all your taxable income — even the money you win betting on sports.

If you’ll be reporting gambling winnings on your federal income tax return, or hoping to write off some gambling losses, be sure to keep detailed records of your wagers and losses.

Does Chumba Casino Report Winnings To Irs

Christina Taylor is senior manager of tax operations for Credit Karma Tax®. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She co-developed an online DIY tax-preparation product, serving as chief operating officer for seven years. She is the current treasurer of the National Association of Computerized Tax Processors and holds a bachelor’s in business administration/accounting from Baker College and an MBA from Meredith College. You can find her on LinkedIn.

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