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What Taxes Are Due on Gambling Winnings?

What Taxes Are Due on Gambling Winnings?

By ADAM BARONE   Updated February 23, 2023 

In 2021, about 76% of people visiting Las Vegas, Nevada took to the gambling tables.  Of all those who gamble, whether in Las Vegas, Atlantic City, New Jersey, or somewhere in between, not to mention on the web, a lucky few take home a lot of money.

Alas, if you win big while gambling, you do not get to keep every penny. Gambling winnings are fully taxable, and the Internal Revenue Service (IRS) has ways of ensuring that it gets its share. And it's not just casino gambling. Winnings from lotteries, horse races, off-track betting, sweepstakes, and game shows are taxable as well.

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If it's any consolation, gambling losses are deductible if you itemize your deductions. But they're deductible only up to the amount that is offset by your winnings, and you must be able to prove it through records of your winnings and losses.

Before heading for the Las Vegas strip, make sure you understand the tax law as it relates to gambling to avoid a mess with the IRS down the road.

KEY TAKEAWAYS

If you win above a certain amount, the payer will deduct 24% from your winnings on the spot.

When you file your annual tax return, you'll report your winnings and your tax payments.

Depending on your tax bracket, you may then have to pay more or you may get a refund.

You can deduct gambling losses up to the amount of winnings that you report, so keep good records.

Gambling always involves a negative expected return—the house always has the advantage.

How Gambling Winnings Are Taxed

If you win a substantial amount of money in any legally operated game of chance, the payer of your winnings will deduct 24% of the total for taxes and will give you a copy of IRS Form W-2G to record the transaction.

What is "a substantial amount of money" in gambling? It depends on the game. It's $1,200 or more in winnings at slot machines or bingo games, but $1,500 for keno. It's $5,000 for sweepstakes, wagering pools, and lotteries.

In any case, 24% of the amount won will be deducted from your payout and sent directly to the IRS, with Form W-2G as the documentation. That 24% is an estimated tax. You might get some of it back or owe more.

 Taxes on winnings at games of skill like blackjack are not immediately withheld but you still are required to report the income and pay taxes on it.

Exceptions to the Rules

To continue reading, please go to the original article here:

https://www.investopedia.com/ask/answers/taxes-on-vegas-gambling-winnings/ 

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