How are gambling winnings taxed in the US?
Let´s take a closer look at US Gambling tax laws. While online and land-based casinos provide endless amounts of fun and entertainment let’s be honest: it’s always great to win. While players undoubtedly enjoy their hands of blackjack, they take the time to learn the likes of basic strategy and card counting because they want to increase their chances of a win. When these wins come, have you ever stopped to think about what actually happens to the money? When you look at some of the huge prizes that are up for grabs with the likes of progressive jackpots, have you ever considered if you’d get to keep every cent if you’re ever lucky enough to win?
If you’ve ever been in that situation then you may already know that the nasty word ‘tax’ creeps in and affects just how much you get to keep. The thing is, just what taxes you’ll pay will depend upon where in the world you’re playing. Certainly, when it comes to gambling in the UK, the tax laws are a million miles away from those in the US. We’re going to take a quick look at how this works in the UK and then compare it to what you can expect to pay in the US. It’s worth bearing in mind that we’re not tax advisors so be sure to get professional advice to keep your affairs in order.
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The UK and gambling tax
The UK has one of the biggest gambling markets in the world. Perhaps part of the reason for this is the fact that the country keeps its gambling tax laws simple. So, how simple can it be? Well, in the UK there is no need to pay any tax on any gambling winnings. Whether you’ve won big on a slot, at a blackjack table or on the spin of the roulette wheel, what you win is yours and there’s no reason to declare it.
The UK takes this approach as the powers that be hold the belief that the house will always win. The feeling is that no matter how much a player may win. Over the course of time they will always lose. That’s not to say that the UK misses out on making money from gambling. It chooses to place all of the tax obligations on the operators rather than the players.
How the US gambling tax laws are poles apart from the UK´s
While the UK authorities have no interest in how much you win at a casino, land-based or online casinos, in the US it’s a very different story. Here, your gambling wins are treated just like any other income and that means that they’re taxable. It could be that the taxes are debt with by the casino (with the amount being deducted from your winnings at source) or it could be that you need to declare your winnings yourself on your IRS. Either way. The authorities know about your winnings and they want their share.
It’s not all doom and gloom though. As gambling winnings are treated like other forms of income it means that the same rules apply when it comes to deductions. When it comes to reporting your winnings you also get to list any expenses that are involved and these are deducted from the amount of tax that you owe. Just be sure that your tax preparation is spot on and that you can clearly show your expenses and itemize them.
A closer look at US gambling tax laws
You may be left wondering just how much tax you’ll be liable to pay should you get lucky. If that’s the case then you’ll be pleased to know that we’re about to take a closer look at that now.
As it stands in the US right now, if your gambling winnings are substantial then you can expect to pay tax at the rate of 24%. This amount is deducted by the casino and you’ll then be given an IRS form. Which you’ll need to file when the time comes. While that all sounds simple enough, you’ll need to know when winnings are classed as being substantial. This depends upon the type of game that you’re playing.
A look at the amounts involved
- Slots – $1,200
- Bingo – $1,200
- Keno – $1,500
- Sweepstakes, wagering pools and lotteries – $5,000
Where things become a little more complicated is when you take a look at games such as blackjack and poker. These are classed as games of skill whereas others are about luck and that means that they’re taxed differently.
How are gambling winnings reported in the US?
When it comes to getting your tax affairs in order, you’ll need form 1040. It’s on this form that your winnings, as well as any tax that you’ve already paid, are recorded. It’s important to note here that the 24% tax that you’ve already paid is just an estimate of the amount due and it’s possible that you’ll owe more.
Whether you’ll need to pay more than the 24% level of tax will depend upon your income level. If your earnings exceed $164,925 then you’ll be subjected to higher rates of tax. With earnings at $86,376 or lower, you’ll pay a reduced level.
What about state taxes?
There are differences between states across the US and how they approach taxes on gambling winnings. Some states say that you must claim your winnings in the state that you won them. You’ll find that almost all states will charge you tax on winnings that you’ve had there regardless of the state that you actually live in.
Final thoughts on US Gambling tax laws
This is just a brief overview and introduction to how gambling winnings are taxed in the US. It’s important to make sure that you seek professional advice. So that you’re paying the correct levels of tax and staying on the right side of the law.
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