Federal Tax Rate on Gambling Winnings

The federal tax rate on gambling winnings is 24 percent, withheld at the source when you win. This means if you win $1,000 at a casino, the casino will hold back $240 before handing you the rest. However, your actual tax liability may be higher or lower than 24 percent depending on your total income for the year.

The 24 percent withholding is a flat rate applied to most gambling winnings over a certain threshold. For slot machines, keno, and bingo, casinos typically withhold when you win $1,200 or more. For horse racing and sports betting, the threshold is often lower. The withholding happens automatically — you do not have to request it.

When you file your tax return, you report all gambling winnings as income on Form 1040, Schedule 1. Your actual tax rate depends on your tax bracket, which is determined by your total income for the year. If you are in the 22 percent bracket, the 24 percent withholding may cover your liability. If you are in the 37 percent bracket, you will owe more. If you are in the 10 percent bracket, you may get a refund of the overpaid withholding.

Key Takeaways

  • Casinos withhold 24 percent of gambling winnings over $1,200 for most games, though the threshold varies by game type and location.
  • The 24 percent withholding is not your final tax bill — your actual rate depends on your tax bracket and total income for the year.
  • You must report all gambling winnings on your federal tax return, even if no withholding occurred or if you received a Form W-2G.
  • State and local taxes on gambling winnings vary widely; some states tax at rates from 6 to 13 percent, while others do not tax gambling income at all.
  • You can deduct gambling losses, but only up to the amount of your winnings, and only if you itemize deductions on your return.

State and Local Taxes on Gambling Winnings

State tax rates on gambling winnings vary significantly depending on where you live and where you won the money. Some states do not tax gambling winnings at all, while others impose rates ranging from 6 to 13 percent. A few states tax only winnings from specific sources, such as lottery tickets or horse racing.

Nevada, for example, does not tax gambling winnings. New Jersey taxes winnings at 1.25 percent for most games but does not tax lottery winnings. Illinois taxes lottery winnings at 24 percent but does not tax casino or sports betting winnings. If you live in one state and gamble in another, you typically owe tax to the state where you won the money, not where you live.

Some cities and counties also impose local taxes on gambling winnings. Atlantic City, New Jersey, for instance, collects a local tax on casino winnings. Las Vegas does not. You should check with your state's revenue department and the specific location where you gambled to understand what you owe locally.

How Casinos Report Your Winnings

When you win a large amount, the casino issues a Form W-2G (Certain Gambling Winnings). This form reports your winnings to both you and the IRS. You will receive a copy by January 31 of the following year. The casino is required to file this form when winnings exceed $1,200 for slot machines, keno, and bingo; $1,500 for horse racing; or $5,000 for poker tournaments.

The Form W-2G shows the gross winnings, the amount withheld, and the type of game. You must include this information on your tax return. Even if you do not receive a Form W-2G — for example, if you won less than the reporting threshold — you are still required to report the winnings on your return.

If you win money at a location that does not issue a Form W-2G, such as a private poker game or online gambling site, you are still responsible for reporting the winnings. Keep your own records of wins and losses, including dates, amounts, and locations. These records support your return if you are audited.

Deducting Gambling Losses

You can deduct gambling losses, but only if you itemize deductions on your tax return and only up to the amount of your gambling winnings. If you won $5,000 and lost $7,000, you can deduct only $5,000 in losses. You cannot use the extra $2,000 in losses to offset other income.

To claim losses, you must have records: receipts, tickets, statements from the casino, or a personal log with dates, locations, and amounts. The IRS takes gambling loss deductions seriously and will ask for documentation if you are audited. Without records, you cannot claim the deduction.

Gambling losses are reported on Schedule A (Itemized Deductions) as a miscellaneous deduction. You can only use this deduction if your total itemized deductions exceed the standard deduction for your filing status. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married filing jointly. If your itemized deductions do not exceed these amounts, you will not benefit from deducting gambling losses.

Self-Employment Tax and Professional Gambling

If you gamble as a profession or business rather than as a hobby, the tax rules change. Professional gamblers report winnings and losses on Schedule C (Profit or Loss from Business) instead of as miscellaneous income. This allows you to deduct all losses, not just up to the amount of winnings.

The IRS distinguishes between hobbyists and professionals based on factors such as how much time you spend gambling, whether you keep detailed records, whether you have a system or strategy, and whether you have made a profit in previous years. If the IRS determines you are a professional, you may also owe self-employment tax on your net winnings.

If you believe your gambling activity qualifies as a business, consult a tax professional before filing. Claiming professional status incorrectly can trigger an audit, and the burden of proof is on you to show that gambling is your business.

Reporting Winnings from Online Gambling and Sports Betting

Online casinos, sportsbooks, and poker sites operate under different reporting rules depending on where they are licensed and where you live. Some sites issue Form W-2G for large wins, while others do not. You are responsible for reporting all winnings regardless of whether you receive a form.

Many online gambling platforms provide year-end statements showing your account activity. Use these statements to calculate your net winnings or losses for the year. If a site does not provide a statement, keep screenshots or read your account history before the year ends.

Sports betting winnings are taxed the same way as casino winnings — at your marginal tax rate, with 24 percent withheld at the source for wins over the threshold. Some states have begun taxing sports betting winnings separately, so check your state's rules if you placed bets in a state other than where you live.

What Happens If You Do Not Report Gambling Winnings

Casinos report large winnings to the IRS on Form W-2G, so the IRS knows about wins over the reporting threshold. If you do not report these winnings on your tax return, the IRS will notice the discrepancy. Unreported income can result in penalties, interest, and potential criminal charges for tax evasion.

Even smaller wins that do not trigger a Form W-2G should be reported. The IRS can cross-reference bank deposits, credit card statements, and casino records. If you deposit a large amount of cash shortly after a casino visit, the IRS may investigate the source.

Penalties for underreporting income start at 20 percent of the underpaid tax. If the IRS determines the underreporting was intentional, criminal penalties can include fines up to $250,000 and imprisonment up to five years.

Frequently Asked Questions

Do I have to pay taxes on gambling winnings if I lost money overall?

Yes, you must report all winnings as income. However, you can deduct losses up to the amount of your winnings if you itemize deductions. If you won $3,000 and lost $5,000, you report the $3,000 as income and deduct $3,000 in losses, resulting in zero net gambling income.

What if I won money at a casino in another state?

You owe federal tax on the winnings regardless of where you won. You also owe state tax to the state where you won the money, not the state where you live. Some states have reciprocal agreements, but most do not. Check both states' tax rules to be safe.

Can I claim gambling losses without itemizing deductions?

No. Gambling losses are only deductible if you itemize deductions on Schedule A. If you take the standard deduction, you cannot deduct gambling losses. For most taxpayers, the standard deduction is larger, so you will not benefit from itemizing.

Do I owe taxes on money I won in a private poker game?

Yes. Winnings from private games are taxable income, even though no Form W-2G will be issued. You must report the winnings on your return and keep your own records of wins and losses. The IRS treats all gambling income the same way.

What if the casino withheld more than I actually owe in taxes?

You will receive a refund when you file your return. The 24 percent withholding is not your final tax bill. If your actual tax rate is lower, the excess withholding is refunded to you. If your rate is higher, you will owe the difference.