When you hit the jackpot, so does your dear old Uncle Sam. Gambling winnings are taxable income. Any casino, lottery, racetrack or other gambling operation that pays you winnings above a specific amount must file Form W-2G. The Internal Revenue Service gets a copy and you get a copy, too.
Box 1 of Form W-2G shows how much you won. Box 2 shows how much federal income tax has been taken out of your winnings. Boxes 3 through 8 and Box 10 give details about the winnings -- date, race, event, game and so on. This information varies depending on what kind of gambling was involved. Boxes 11 and 12 provide additional identification information that the payer might have taken down at the time you won, such as your driver's license number. Box 13 identifies the payer -- a tax ID number in the case of a gambling operator, or a state abbreviation for a lottery. Box 14 shows how much state tax has been withheld.
Your winnings are income, so gambling operators usually withhold federal income taxes. The standard withholding is 25 percent. The actual tax rate you owe depends on your total income, and you'll square up when you file your income taxes at the end of the year. If the operator withheld too much, you'll get a refund (another jackpot!). If too little was withheld, you'll have to chip in more. aws State income taxes from gambling winnings vary by state.
A gambling operator has to file a W-2G if winnings are above a certain amount. As of 2012, that amount was $1,200 for bingo games and slot machines. For keno games, it was $1,500. For poker tournaments, it was $5,000. For other gambling winnings, the operator had to file a W-2G if the winnings were at least $600 and were at least 300 times the amount wagered. So a $5 scratch ticket that produced a $1,000 payoff might not trigger a W-2G, but a $1 scratch ticket that produced $1,000 would. Operators can issue W-2Gs for amounts less than the minimums. Even if you don't receive a W-2G, you're still responsible for reporting and paying taxes on your winnings.
Doing Your Taxes
Gambling winnings go on Line 21 of Form 1040, your federal tax return (if you have gambling income, you can't file the 1040A or 1040EZ). On the bright side, you can take a tax deduction for any gambling losses you might have incurred up to the amount of your winnings. To deduct losses, you have to itemize your deductions using Schedule A. Gambling losses go on Line 28, "Other Miscellaneous Deductions."
- BananaStock/BananaStock/Getty Images
- How to File With Form 1099-B
- "If Owing Back Taxes or Child Support, Will the Government Take Lottery Winnings to Pay for It?"
- Are Gains from Arbitrage Betting Considered Taxable Income?
- How to File Taxes When One's Child Receives Social Security Benefits
- Does an American Citizen Who Wins the Lottery in a Foreign Country Have to Pay US Taxes?
- I Forgot to Add My Daughters to My Tax Return