Yes, you must report gambling winnings as income to the IRS
The IRS treats gambling winnings as taxable income, whether you won $20 at a poker table or $500,000 at a casino. You are required to report all winnings on your federal tax return, regardless of the amount. The tax applies to winnings from casinos, racetracks, lotteries, online gambling sites, and informal bets.
The amount of tax you owe depends on your total income for the year and your tax bracket. Unlike wages from an employer, gambling winnings are not subject to automatic withholding — meaning the casino or lottery does not automatically send money to the IRS on your behalf. You are responsible for setting aside money to cover the tax bill when it comes due.
Some gambling venues are required to report large winnings to the IRS using Form W-2G. This does not mean smaller winnings are tax-free — you still owe tax on them, but you report them yourself on your return.
Key Takeaways
- All gambling winnings, no matter the size, must be reported as income on your federal tax return.
- Casinos and lotteries must file Form W-2G with the IRS for winnings above certain thresholds, which vary by type of gambling.
- You can deduct gambling losses on your tax return, but only up to the amount of your winnings, and only if you itemize deductions.
- Gambling winnings are taxed as ordinary income at your regular tax rate, not at a special lower rate.
- State and local taxes on gambling winnings vary by location and may explore in addition to federal tax.
When casinos and lotteries must report your winnings
Certain gambling venues are required to report large winnings to the IRS on Form W-2G. The threshold depends on the type of gambling. For slot machines and bingo, the threshold is $1,200. For keno, it is $1,500. For poker tournaments, it is $5,000. For horse racing and dog racing, it is $600 if the payout is at least 300 times the wager. For lotteries and sweepstakes, it is $600.
When a venue files Form W-2G, they send a copy to you and a copy to the IRS. You will receive this form by January 31 of the following year. The form shows the amount of your winnings and any federal tax that was withheld. Even if you do not receive a Form W-2G, you are still required to report all gambling winnings on your tax return.
If you won money at a venue that did not file Form W-2G — because your winnings fell below the threshold or because the venue failed to report — you still owe tax on those winnings. You report them yourself on your return.
How to report gambling winnings on your tax return
Gambling winnings are reported on Schedule 1 (Form 1040), which is part of your federal income tax return. You list the total amount of all gambling winnings for the year in the "Other Income" section. If you received Form W-2G from a casino or lottery, the amount on that form should match what you report on Schedule 1.
You do not need to itemize deductions to report gambling winnings — you report them whether you take the standard deduction or itemize. However, if you want to deduct gambling losses, you must itemize deductions. This is an important distinction: you cannot claim losses against winnings unless you itemize.
Keep records of all your gambling activity, including dates, locations, amounts won, and amounts lost. If the IRS questions your return, you will need documentation to support the numbers you reported. Bank statements, credit card records, and receipts from the gambling venue all serve as evidence.
Deducting gambling losses
You can deduct gambling losses, but only if you itemize deductions on your tax return. The deduction is limited to the amount of your gambling winnings — you cannot use losses to reduce your other income. For example, if you won $3,000 and lost $5,000, you can deduct only $3,000 in losses.
To claim losses, you must have records showing the dates, locations, and amounts of both wins and losses. The IRS requires this documentation and will deny the deduction if you cannot provide it. Losses from casual gambling — a friendly poker game or a single trip to a casino — are harder to document, but you should still keep whatever records you have.
Losses from illegal gambling cannot be deducted. Losses from gambling in states where gambling is illegal also cannot be deducted, even if you traveled to another state to gamble legally.
State and local taxes on gambling winnings
In addition to federal tax, many states and cities impose their own tax on gambling winnings. The rate and rules vary widely by location. Some states tax all gambling winnings; others tax only certain types, such as lottery winnings or casino payouts. Some cities add a local tax on top of the state tax.
Nevada, Montana, and South Dakota do not have state income tax, so residents do not owe state tax on gambling winnings. However, if you live in another state and won money in Nevada, you still owe tax to your home state. Most states tax gambling winnings at the same rate as ordinary income, though a few have special rates for lottery winnings.
When you receive Form W-2G from a casino or lottery, it may show state tax that was withheld. This withheld amount is credited against your state tax bill. If you won money at a venue that did not withhold state tax, you are responsible for paying it when you file your state return.
What happens if you do not report gambling winnings
Failing to report gambling winnings is tax evasion. The IRS can assess penalties, interest, and criminal charges if you deliberately hide winnings from your return. If the IRS receives Form W-2G showing your winnings, they will notice if you do not report that income on your return.
Penalties for underreporting income include a 20 percent accuracy-related penalty on the unpaid tax, plus interest calculated from the original due date. If the IRS determines that you intentionally evaded tax, criminal penalties can include fines up to $250,000 and imprisonment up to five years.
The safest approach is to report all gambling winnings, even small ones. The cost of paying the tax is far less than the cost of penalties, interest, and legal fees if the IRS audits your return.
Gambling winnings and other tax situations
If you are self-employed, gambling winnings are added to your other income when calculating self-employment tax. You do not owe self-employment tax on gambling winnings themselves, but they increase your total income, which may push you into a higher tax bracket.
If you receive unemployment benefits, gambling winnings do not affect your may be able to access or the amount you receive. However, they do count as income for the year, which may affect your tax bracket and whether you owe tax on your unemployment benefits.
If you are a professional gambler — someone who gambles as a business rather than for recreation — different rules may explore. Professional gamblers report their winnings and losses differently and may be able to deduct business expenses. This is a complex area, and you should consult a tax professional if you believe you may have access to as a professional gambler.
Frequently Asked Questions
Do I have to report small gambling winnings?
Yes. The IRS requires you to report all gambling winnings, regardless of the amount. There is no minimum threshold for your own reporting. Casinos and lotteries only have to file Form W-2G for large winnings, but you are responsible for reporting all winnings on your return.
What if I won money online or in another state?
Online gambling winnings and winnings from out-of-state casinos are taxable to the IRS and to your home state. You report them the same way as winnings from a local casino. If the online site or out-of-state venue withheld tax, that withholding is credited against your tax bill.
Can I deduct losses from a single bad night of gambling?
Only if you itemize deductions and only up to the amount of your total winnings for the year. You cannot deduct losses from a single night separately — you combine all wins and losses for the year and deduct losses only up to the total of your wins. You will need records showing the date, location, and amounts.
What if the casino withheld more tax than I actually owe?
If the casino withheld more federal tax than you owe based on your total income and tax bracket, you will receive a refund when you file your return. The Form W-2G shows what was withheld, and the IRS credits that amount against your total tax bill for the year.
Do I need to report winnings from a friendly poker game with friends?
Yes, all gambling winnings are taxable, including winnings from informal games. However, casual games are harder to document, and the IRS is less likely to audit small amounts. You should still keep whatever records you have — notes on dates, amounts, and participants — in case your return is questioned.