Gambling winnings are considered taxable income by the Internal Revenue Service (IRS), and they must be reported on your federal income tax return. Whether you win from a casino slot machine, poker tournament, lottery, or sports betting, the IRS expects you to report every dollar. This guide explains how gambling winnings are taxed, how to report them using Form W-2G, and what you can do to reduce your tax burden responsibly.
What Is Form W-2G?
Form W-2G, Certain Gambling Winnings, is an IRS form used to report gambling winnings and any federal income tax withheld on those winnings. If your winnings meet specific thresholds, the payer (such as a casino or lottery commission) is required to issue you a W-2G and submit a copy to the IRS.
When Will You Receive a Form W-2G?
You will generally receive Form W-2G if your gambling winnings are:
- $1,200 or more from bingo or slot machines
- $1,500 or more from keno (minus the amount of the wager)
- $5,000 or more from a poker tournament (after entry fee)
- $600 or more (and at least 300 times the amount wagered) from other gambling, such as lottery or raffles
If taxes were withheld from your winnings, you will always receive a Form W-2G regardless of the amount.
What’s on the W-2G Form?
Key boxes on the W-2G include:
- Box 1: Amount of gambling winnings
- Box 2: Federal income tax withheld
- Box 3: Type of wager (e.g., slot machine, bingo, lottery)
- Box 4: Date of the winnings
- Box 5: Transaction number
- Box 7: Winnings from state income tax purposes
How to Report Gambling Winnings on Your Tax Return
All gambling winnings must be reported as “Other Income” on your Form 1040, Schedule 1, Line 8b. Even if you don’t receive a Form W-2G, you’re still legally required to report all gambling income.
The total gambling income from Schedule 1 is transferred to Form 1040, Line 8 as part of your total income.
Can You Deduct Gambling Losses?
Yes, gambling losses are deductible—but only if you itemize deductions on Schedule A (Form 1040). You cannot deduct more than the amount of gambling income you report. For example, if you won $3,000 and lost $4,000, you can only deduct $3,000.
Requirements to Deduct Gambling Losses:
- You must keep detailed records (e.g., tickets, receipts, and logbooks)
- Losses must be directly related to gambling activities
- Losses are deducted under “Other Itemized Deductions” on Schedule A
Withholding on Gambling Winnings
If your winnings are significant, the payer may withhold 24% for federal income tax. This is known as regular withholding. In some cases, backup withholding of 24% may apply if you don’t provide a taxpayer identification number (TIN).
The amount withheld will be reported on your W-2G and can be claimed as a credit when filing your tax return on Form 1040, Line 25b.
State Taxes on Gambling Winnings
Many states tax gambling winnings in addition to the federal government. Some states, like Pennsylvania and Michigan, levy flat-rate taxes on all gambling income. Others, like New Hampshire, do not tax wages but may still tax gambling income.
Check with your state department of revenue to understand how your gambling winnings are treated for state income tax purposes.
Nonresident Aliens and Gambling Income
For nonresident aliens, gambling winnings are generally subject to a flat 30% withholding rate, unless a tax treaty between the U.S. and the individual’s country of residence allows a lower rate or exemption. These individuals must file Form 1040-NR to report U.S. income.
Recordkeeping for Gambling Activities
To substantiate your winnings and losses, the IRS recommends maintaining the following documentation:
- Wagering tickets, canceled checks, and receipts
- Form W-2G copies
- Bank withdrawal and deposit records
- A gambling log showing the date, location, type of game, amounts won/lost, and names of witnesses (if possible)
Examples of Reportable Gambling Winnings
- Winning $3,000 on a slot machine at a casino
- Winning $1,500 in a state lottery
- Winning $6,000 in a poker tournament with a $1,000 buy-in
- Sports betting payouts over $600 that are 300 times the wager
Penalties for Not Reporting Gambling Winnings
Failure to report gambling income can result in penalties, interest, and possible audits. The IRS receives copies of all W-2G forms issued, so discrepancies between your return and their records can trigger red flags.
Conclusion
Gambling winnings are fully taxable and must be reported to the IRS using Form W-2G when applicable. Even smaller winnings not reported on a W-2G are still required to be reported as income. By understanding the rules, maintaining accurate records, and properly completing your tax return, you can remain compliant and avoid penalties.
If you’re unsure how to report your winnings or claim losses, consult a tax professional who has experience with gambling income and IRS requirements.
