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Taxes on Your Gambling Winnings – You Owe Uncle Sam a Piece No Matter How Much You Won
When playing in a casino, you can win a few dollars here and there and walk away with more dollars than you brought in. It can be as little as $20, or up to $1,000. When cashing out, you were never presented with a form to report your winnings to the IRS. If you think you are free at home, think again. As a US citizen, you owe Uncle Sam a share of the stock, regardless of the amount. Many players think that just because they haven’t received a tax form, they are free. Not so.
So what gets reported to the IRS? Larger sums are won at gambling establishments such as casinos, lottery retailers, racetracks and off-track betting parlors. They will issue a Form W-2G, one copy for you and one for the IRS. Here are some details:
$1,200 or more won on slots, video poker, video keno, video blackjack, etc. This only applies to one jackpot amount. Accumulated credits are credit meter gains and do not count.
$1,200 or more won at a live bingo game will also trigger a W-2G, and $1,500 or more at a live keno game (minus your bet amounts).
The casino will not withhold any gambling tax on rewards between $1,200 and $1,500 provided you present valid photo ID and a social security number. If you do not provide this information, 28% will be withheld.
Live Table Games
Winnings from live table games are not declared on a W-2G unless there is a very large prize amount offered for a small bet, such as a dollar bet for a shot at a progressive table jackpot , where the odds of winning are greater than 300/1 and the payout is greater than $600. For example, Caribbean Stud offers a huge progressive jackpot for betting just $1, if you’re lucky enough to hit a royal flush.
If you win $600 or more in any other betting game, such as horse racing, dog racing, or sports betting, and the amount is at least 300 times your bet minus your bet amount, the establishment will provide you with a W-2G. If your winnings exceed $5,000 and the amount is more than 300 times your stake, 25% will be withheld. The same percentage holdback also applies to any cash prize of $5,000 or more in poker or other card tournaments minus the buy-in amount.
Winnings on state lottery games such as lotto, numbers, scratch cards, etc. can be collected at your local retailer for up to $600. Any more and you’ll need to go to your community’s main lottery office, where a W-2G is also waiting for you. This information comes from the New York Lottery. Other states may have different rules.
Winnings from Daily Fantasy Sports (DFS) contests are currently considered games of skill. DFS sites will issue a 1099-MISC, not a W-2G for winnings of $600 or more.
Video Lottery Terminals (VLTs)
$600 or more in winnings from any Class II â€‹Video Lottery Terminal game will also prompt a W-2G. This includes all winnings on machines in jurisdictions operated by a state lottery. For example, New York State has nine race tracks with VLTs that are pseudo-slots and video pokers.
The good news in all of this is that gambling losses are tax deductible, but only up to the amount of your winnings, and only if you itemize the deductions on your tax return.
The IRS wants to make sure that you have in fact lost what you claim to have lost, so a record of all your losses is required. Winning and loss statements are available at most major casinos at the end of the year, provided you use your player’s club card when playing the machines. Record those who lose scratch tickets, Lotto, Powerball and Mega-Millions tickets, daily numbers, Quick Draw, OTB, etc.
For losses on Daily Fantasy Sports contests, the position of the IRS at this time is unclear. Because of skill factor, your earnings are in the hobby Category. Therefore, any loss would not be deductible, although this situation could change at any time.
You are not required to record the tickets on your tax slip, but they may be required if you are audited. All the IRS wants to know is the type of bet, the amount of the bet and the date of the transaction.
Always be careful and check with your tax preparer for your personal needs.
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