Gambling winnings tax: What is gambling income tax?

Consider this scenario: you win the lottery and strike it rich. But are your takings considered taxable gambling winnings? And if so, how much federal and state tax is imposed? Not to spoil the moment, but if you’ve just won big, you might be curious about the impact of the Mega Millions or Powerball after taxes.

This tax guide will share gambling winnings tax information, including how to treat income from casino winnings, sports betting, bingo, noncash prizes, and more.

Taxes on gambling winnings: 101

Here’s the truth with gambling and taxes: both cash and noncash gambling winnings are fully taxable and included in your total income tax liability. Note: There is not a specific gambling tax, but some people may think of the taxation of winnings as gambling tax. 

Gambling: Tax on cash winnings

Cash winnings include money you received from:

• Bingo
• Blackjack, poker, and other sit-down casino games
• Game shows
• Horse race betting
• Keno
• Lottery payouts
• Raffles
• Slot machines
• Sports betting
• Sweepstakes
• Wagering pools

Gambling: Tax on noncash winnings

Your winnings might be noncash—or sources of income that don’t involve cash inflow or outflow. In those cases, you should include the item’s fair market value (FMV) when figuring out the gambling tax on the item. Examples of noncash winnings include:

• Appliances
• Cars
• Electronics
• Gift cards
• Jewelry
• Meals that are “comped” by the casino
• Prizes
• Tickets
• Vacations

Gambling and bet winnings tax reporting

Where you report gambling winnings depends on whether you are a non-professional or professional gambler.

How to pay taxes on gambling winnings: For non-professionals

For non-professional gamblers, also called casual gamblers, follow the next guidance. If your winnings meet or exceed certain thresholds, you will receive a copy of Form W-2G showing you how much you won to help you with your tax reporting.

Report gambling winnings on line 8b of Schedule 1 (Form 1040). Note that you should report your winnings even if you don’t receive a Form W-2G.

Tax Form W-2G should be given to you if you have a gambling win of:

• $600 or more if the amount is at least 300 times the wager (the payer has the option to reduce the winnings by the wager)
• $1,200 or more (not reduced by wager) in winnings from bingo or slot machines
• $1,500 or more in winnings (reduced by wager) from keno
• More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament
• More than $5,000 from sweepstakes, wagering pools, and lotteries

Income tax withholding for gambling winnings

Withholding is required when the winnings, minus the bet, are:

• More than $5,000 from sweepstakes, wagering pools, lotteries, including payments made to winners of poker tournaments
• At least 300 times the amount of the bet.

If your winnings are reported on an Internal Revenue Service Form W-2G, federal income tax is withheld at a flat rate of 24%. Even if you didn’t give the payer your tax ID number, the withholding tax rate is also 24%.

You will also report the W-2G withholding on line 25C of Form 1040. As with any other income tax withholding, if it is more than your tax liability you will receive a refund. Keep in mind that you should report gambling winnings even if you do not receive Form W-2G.

How are professional gamblers taxed?

Professional gamblers are taxed as self-employed individuals. As such, they should report gambling earnings and expenses on Schedule C. While all gambling income should be reported, professional gamblers can deduct business-related expenses like travel and tournament fees. Additionally, they must pay self-employment tax, which covers Social Security and Medicare contributions. To be considered a professional gambler, you must be in the trade or business of gambling. This means it is a regular activity from which you intend to earn a profit or livelihood. Most taxpayers are not professional gamblers, even if they visit casinos frequently.  

Reporting gambling losses

Sometimes, you don’t win big. In these cases, if it makes sense for you to itemize deductions, you can deduct gambling losses for the year on Schedule A.  However, you can only deduct losses up to the amount you report as gambling winnings. You may not net gambling winnings and losses together.

Related: What is Schedule A and what is the difference between standard deduction vs. itemized deductions?

How long should you keep gambling tax records?

It’s important to keep detailed records to substantiate your tax deduction or wages received from gambling. Keep:

• Accurate gambling winnings and loss records
• Documentation of your gambling activity that can be verified by the IRS

Do I have to pay state tax on gambling earnings?

Some states will tax your gambling winnings, while others don’t. For example, states like New York tax gambling income, whereas states like Florida and Texas don’t have a state income tax, so no additional state tax is owed on those winnings. View the no income tax states.

It’s important to check your specific state tax laws to ensure you’ve met all tax filing requirements.

Get help filing taxes with gambling winnings

Tax preparation after you get lucky with gambling can get tricky. Whether you choose to file with a tax pro or file with H&R Block Online, you can rest assured that we’ll get you the biggest refund possible.