Taxes on your gambling winnings: You owe a share to Uncle Sam no matter how much you win

When you play at a casino, you may win a few bucks here and there and walk away with more bucks than you brought with you. It can be as little as $20 or as much as $1,000. When collecting, you were never presented with a form to report your earnings to the IRS. If you think you’re home free, think again. As a US citizen, you owe Uncle Sam a share of the action, regardless of the amount. Many players think that just because they were not given a tax form, they are home free. Not so.

So what gets reported to the IRS? Larger amounts are won at gambling establishments such as casinos, lottery shops, racetracks, and backcountry betting parlors. They will issue a W-2G form, one copy to you and one to the IRS. Here are some details:

machine games

$1,200 or more won on a slot machine, video poker, video keno, video blackjack, etc. This only applies to a single jackpot payout amount. Accumulated credits are credit meter gains and do not count.

$1,200 or more won in a live bingo game will also trigger a W-2G, and $1,500 or more in a live keno game (minus your wagering amounts).

The casino will not withhold any game tax from prizes in the range of $1,200 to $1,500 as long as you present a valid photo ID and social security number. If you do not provide this information, 28% will be withheld.

live board games

Live table game winnings are not reported on a W-2G form, except if a very large prize amount is offered for a small bet, such as a dollar bet for a chance at a progressive table jackpot, where the odds of winning are more than 300./1 and the profit is more than $600. For example, Caribbean Stud offers a huge progressive jackpot for betting just $1, if you’re lucky enough to win a royal flush.

If you win $600 or more on any other gambling game, such as horse racing, dog racing, or sports betting, and the amount is at least 300 times your stake minus your wager amount, the establishment will give you 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 withholding percentage also applies to any cash prize of $5,000 or more in poker or other card tournaments less the buy-in amount.

Winnings in state lottery games such as lotto, numbers, scratch cards, etc. can be picked up at your local dealer for up to $600. A little more and you’ll have to visit the main lottery office in your community, where a W-2G form is also waiting for you. This information is from the New York Lottery. Other states may have different rules.

Winnings in Daily Fantasy Sports (DFS) contests are currently considered Games of Skill. DFS sites will issue a 1099-MISC, not a W-2G for earnings of $600 or more.

Video Lottery Terminals (VLT)

$600 or more in earnings of any class II ​Video Lottery Terminal game will also invite W-2G. This includes any winnings on machines in jurisdictions operated by a state lottery. For example, New York State has nine VLT racetracks that are pseudo slots and video poker.

deductions

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 really lost what you claim to have lost, so a record of all your losses is required. Profit and loss statements are available at most major casinos at the end of the year, provided you have used your player’s club card when playing the machines. Save those who lose Scratch-Off Tickets, Lotto, Powerball and Mega-Millions Tickets, Daily Numbers, Quick Draw, OTB, etc.

For losses in Daily Fantasy Sports contests, the IRS position at this time is unclear. Due to the ability factor, your earnings are in the hobby category. Therefore, the losses would not be deductible, although this situation could change at any time.

You do not need to record the tickets on your tax return, 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 play it safe and consult with your tax preparer for your personal needs.