Taxes on gambling winnings

Is there a tax on lottery and gambling winnings?

Yes. Large or small, you must report all winnings from lotteries, sports, racing, bingo, cards, slot machines, game shows, and more. You must pay tax on all winnings in the U.S. or any other country. Not sure how to report your winnings? Your Tax Pro can help.

How much of my lottery or gambling winnings do I need to report?

You must report the total amount of winnings you received. If your winnings are high enough, you should receive a W-2G from the organization that rewarded you. Different types of winnings have different minimum amounts for issuing a W-2G. The minimum amount you must report on your tax return is $1.00, even if you don’t have a W-2G. 

The IRS requires 24% of lottery winnings be withheld, but it may not fully cover the taxes owed. Tax payments are based on the gambling winnings tax rate you end up at. The highest federal tax rate is 37%, so you could owe a tax bill at the end of the year. To avoid this, you can send an estimated tax payment to the IRS when you receive your check. Don’t forget state taxes. Many states tax gambling winnings as income. 

If you win the lottery in a state other than where you live, you could have to pay taxes in both states and claim a credit on  your home state for the taxes paid in the state you won. Not all states tax lottery winnings and not all states have an income tax. The laws around gambling winnings and state taxes are confusing and you should talk to a tax pro about your gambling winnings and income taxes.

Let’s talk about deductions. Can you write off gambling losses?

You cannot net out your winnings with your losses, no. You also cannot deduct the expenses you incur to gamble, such as:

• transportation
• hotel
• food
• cover charges at betting venues

However, you can deduct all losses up to the winning amount on your return. Keep in mind, the standard deduction amount is very high, and most people don’t qualify. So, if you take the standard deduction and don’t itemize, you cannot deduct your losses. See your local Tax Pro for the best, expert help with filing your tax return.

Are there penalties for not reporting gambling winnings?

Every taxpayer must report all income, whether filing with a Tax Pro or filing taxes online, especially from gambling or lottery winnings, or face penalties. 

Winning money or coming into a sudden windfall can be a dream come true. Just be sure you have an expert Tax Pro on your side to help you avoid less dreamy circumstances, should you fail to report your winnings come tax season.