Tax on Betting Winnings

With the opening up of legal sports gambling across the United States, potential gamblers should really take note of the tax situation with regards to winnings for casual sports gamblers.

The first thing to note is you are liable to pay tax on both cash and non-cash winnings, i.e. if the prize is a car or holiday, this will be assessed at Fair Market value.

Everyone must pay tax on any winnings that exceed $600 in a single year (or on any bet that is valued at 300 times or more the initial wager). Should you win more than $600 or hit a big win on say, the lottery, then you must declare that when you file your tax return.

To help with this, the IRS suggests that you should keep a gambling diary which accurately records all your wins and losses. This will make filing your tax return accurately a whole lot easier and should you get audited, will allow you to quickly and accurately provide records of your gambling activities.

The format they suggest is the following for each time you gamble:

Date

Type of Bet

Name/Address of Establishment (or Online Sportsbook)

Name of other people at the venue (if applicable)

Amount of Winnings and/or Losses

For the purposes of this website, we are all about online Sportsbooks but if you take part in any gambling activity, including the lottery, bingo, raffles, casino games, slot machines etc... then you need to record all that information accurately as well.

Gambling winnings are currently taxed at a flat rate of 24%.

If you think that the IRS won’t know about your big win then you are very much mistaken. Should your win be classified for any of the following, a W-2G Form will be issued notifying the IRS of the money won. Therefore ensure that you put it down on your tax return.

    $600 or more if the amount is at least 300 times the wager

    $1,200 or more in winnings from bingo or slot machines

    $1,500 or more in winnings from keno

    More than $5,000 in winnings from a poker tournament

    Any winnings subject to a federal income-tax withholding requirement

If you are lucky enough that you win enough that your winnings get reported on a Form W-2G, you’ll find that federal taxes are withheld at a flat rate of 24%. If you didn’t provide the casino or sportsbook your tax ID number, the withholding rate goes up to 28%. Your money will be withheld when the winnings, minus the bet are either above the $5,000 threshold and/or at least 300 times the amount of the bet

You should receive a copy of your Form W-2G showing the amount you won along with the amount of tax that has been withheld. As good practice you should include all your winnings on your tax return even if for some reason, the Form W-2G is not provided to you.

The most important thing to understand is that your winning and losses on gambling should always be accurately recorded on your tax return. Failure to do so may well result in a fine or worse down the road.