Taxes on gambling winnings
There are some things you should know if you are lucky enough to win. The Internal Revenue Service (IRS) requires all casinos in certain instances to withhold federal taxes if you win over a certain amount. The percentage withheld ranges between 25 and 30 percent depending on how you won. Here is how it works.
If you had gambling winnings, the casino is required by the IRS Information Reporting rules to withhold 28% as income tax if you do not provide a documented TIN (Taxpayer Identification Number, that is, your Social Security Number.) We have heard of cases where it is withheld no matter what. The withholding tax is 30% if a foreign gambler. The tax rate is 25 percent if the amount is over $5,000 (except for non-resident aliens.)
IRS Form W-2G
When your winnings exceed a specified threshold and/or tax is withheld, the casino will give you an IRS Form W-2G showing the amount you won and the amount of tax withheld. Report (and take credit for the tax you paid) on your IRS Form 1040 tax return at the end of the year. (Only use Form 1040 if you had gambling winnings; you cannot use any other form.)
Generally, gambling winnings are reportable to the IRS if the amount paid is (a) $600 or more and (b) at least 300 times the amount of the wager. This requirement primarily applies to lotteries, sweepstakes and other big winnings from small bets. It does not apply to winnings from bingo, keno, and slot machines.
Casinos report gambling winnings for these games to the IRS when a player wins $1,200 or more from a bingo game or slot machine or if the proceeds are $1,500 or more from a keno game. When you exceed these amounts, the casino may withhold taxes and will provide you with IRS Form W-2G. They keep the original and give you two copies of the form. (If state income tax withholding is required on gambling winnings in your state, additional taxes may be withheld.)
The rules are different for table games (such as blackjack, baccarat, craps, roulette or other spinning wheel games.) Since Nevada casinos do not know the amount you started with, they are not able to determine how much you won (...your taxable gain.) As a result, federal law provides that there is no withholding or even reporting of table game wins to the IRS. It therefore follows that table game winners probably do not report their gambling profits to the IRS.
You not only pay taxes on gambling profits, but you can also claim gambling losses as an itemized deduction as well. But you must keep some kind of documentation (such as a diary or tickets) to substantiate the amount and nature of the losses. In any event, you cannot claim gambling losses that exceed your winnings.
