Tax Casino Winnings Us

Winnings are taxed the same as wages or salaries are, and the total amount the winner receives must be reported on their tax return each year. Before the winner receives any of the money, however, the IRS automatically takes 24% of the winnings. The rest of the winnings are expected to be paid by the winner when filing the return.

Tax Casino Winnings Usa

1. Whether you are reading this before or after a big win, understanding what the US tax on lottery winnings is well worth your while. Since there is a huge tax difference between states and even certain cities, spending a few minutes to grasp a few basics now could ultimately save you a fortune later on.
2. The payer of the prize winnings will withhold and remit U.S. Income taxes to the IRS. For example, if a nonresident wins a large payout at a Vegas casino of $3,000, the casino will withhold $900 in taxes and give the winner $2,100 in cash.

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Online poker taxes in the United States

Many players may think that they can get away with not paying taxes on winnings because it was not won in a traditional casino. This could not further from the truth. Just as the technology for online poker has advanced over the years, so has the technology that helps the US Government monitor banking transactions. This is not just true for money that you deposit into a bank account. It goes well beyond that.

While depositing a check or receiving a wire from an online poker room may draw some scrutiny from the IRS, the government has other ways of tracking your online poker winnings down too.

The Neteller bust in 2007 was the first time it became obvious to online gamblers that the US Government could monitor their transactions. Many players thought that the IRS would never gain access to this information. They were proven wrong. Many players were forced to scramble to pay taxes on their winnings before they got a dreaded tax bill. Many players learned a lesson here, while others did not.

Neteller was just one of many US facing ewallets to fall. The government seized UseMyWallet, QuickTender, eCheckUS, eWalletXpress, PrePaidATM and many fly by night processors that processed US online gambling payments. The Department of Justice even created a bogus processor called Linwood Payment Solutions and received countless information about player payments that passed through their processing center. This gave the feds unlimited access to online poker player's transactions that were once thought to go under the radar.

Ewallets were not the only companies handing over their player records to the US Government. Busted online poker rooms and other online gambling companies were doing the same thing. PokerStars, Full Tilt Poker, Absolute Poker and Ultimate Bet are just a few of the names that were forced to turn over player records to federal authorities. The lesson learned here is that there is always a chance that the information that you thought was private can fall into the hands of the IRS.

Brick and mortar poker taxes

Brick and mortar wins are a bit it easier to hide, but there is still an obligation to report your winnings. Each cash game session must be logged. The IRS does not define what a session is. Keeping a daily journal of wins and losses should suffice. Tournament players should log each tournament entry. A poker room will be happy to give you a receipt for any tournament entry upon request. Large tournaments will automatically provide one.

A casino will issue a W2G any time that a player nets $5,000 or more in a brick and mortar tournament. A W2G is a tax form that will be submitted to the IRS with the player's Social Security Number and other personal information. Players can refuse to provide this information. If they do, the casino is required to automatically withhold taxes on the win.

Brick and mortar players should also be aware that a casino is obligated to create a Currency Transaction Report any time a player crosses more than $10,000 through the casino cage in a 24 hour period. Poker players should also know that the casino may report any transaction that they consider to be suspicious as this is required by federal law.

Should you file as professional or recreational gambler?

There are two ways to declare poker winnings. One way is to enter the income under miscellaneous income. This is what most players will do. A player that files as a recreational player will pay their standard tax rate on this money, but will not have to pay Social Security or Medicare taxes on these winning. Most players that have full time jobs will file this way.

Players that have demonstrated a pattern of winning can claim their winnings as a professional gambler, regardless of whether the player has a full time job or not. A pattern of winning is not defined by the IRS, but many believe it means the player has gambling wins in two of the last three or three of the last five years. This is where it gets complicated, as this type of filing requires a Schedule C tax form. This is the same tax form used by self-employed business owners. There are many advantages to filing this way and one large drawback.

The drawback is that a player that files as a professional player must pay the self-employment tax on that money. When someone has a standard job they pay 6.2% of their income for Social Security and their employer matches this. This means that since you are filing as self-employed, you pay both sides of this tax because there is no employer to pay the other half. The percentage for the employee side was 4.2% in 2012, but it went back up to the traditional level of 6.2% for the 2013 tax year. There is also a 2.9% Medicare tax. This means that you will pay 15.3% in taxes placing poker income under a Schedule C, where adding it on a 1040 as Other Income will not trigger this tax. The total percentage in 2012 was 13.3% due to the Social Security tax reduction during the recession. Schedule C filers will be able to deduct 6.2% of the tax as a business expense. This adds some tax relief.

Professional poker player tax deductions

The good news is that professional players that file a Schedule C may deduct all expenses that are related to their poker business. Travel expenses tend to be the largest for professional poker players. The mileage expense for 2012 was 55.5 cents per mile. That number will be 56.5 cents in 2013. This includes miles driven to and from any casino or other gambling establishment in your personal vehicle as long as your intention was to win money. Players that think they may file this way should keep a log of how many miles that are driven to and from any poker game, even if the game was not in a traditional casino. You will need this information to decide which way to file at the end of the year.

Other travel expenses may be deducted as well. This includes airfare, hotel and rental car expenses when you take a trip where your primary purpose is to win money playing poker or some other gambling game that requires skill.

Online poker players may also have other expenses related to their work. Computers are deductible as a business expense. If you bought a computer with the sole purpose of using it for your poker business, then it qualifies as a tax deduction. So does that monitor setup needed to 24-table.

There are also some expenses that get overlooked. Your internet connection may be deductible up to the percentage of its use that is used for online poker. If you bought a computer desk, chair, floor mat or anything else office related, then that is deductible too.

You can even take the home office exemption, although this may start to push the limit. A business owner can deduct a percentage of their rent that is based on the percentage of their apartment or home devoted entirely to their business. This can be risky though. First, this has been known to send a red flag to the IRS. Second, people that do not rent may find problems down the road when they sell their home. It may create a taxable event when the home is sold if the home is considered to be a primary residence.

State income taxes

Many states tax gambling winnings. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming have no state income tax. Players in other states should expect to pay taxes to their state beyond what is paid to the IRS.

How should a poker player tax plan?

If a player has a net cash win of $5,000 in a poker tournament in a brick and mortar casino they will receive a W2G. A player will also receive a W2G for a $1,200 gross slot win. A player has the option of having an amount withheld from their win of up to 39.6% to cover taxes in 2013. If you are the type of player that has bankroll management problems, then having the casino withhold a percentage of your win is probably a good idea. This will prevent a nasty surprise when tax time comes in 2014. There is nothing worse than owing the government money that you do not have. Do not let yourself get into that situation.

One exception to asking for a tax withholding is if you are a net losing or break even player. Even then, there is still a disadvantage to receiving a W2G.

A player can write off their gambling losses up to the amount that they won. Gambling losses are an itemized deduction though. A player that typically takes the standard deduction will not be able to write off all of their losses. Most people that do not have a home mortgage interest deduction or donate a lot of money to charity will take the standard deduction. The standard deduction for 2013 is $6,100 for single filers and $12,200 for married couples filing jointly. If you do not itemized deductions normally then you will end up getting taxed on the applicable amount, even after itemizing gambling losses, because you could already deduct the standard deduction amount.

Tax planning for 2013

It is too late to plan for 2012, but it is not too late to plan for 2013. There are several phone apps that track sessions. These include Poker Journal and Poker Income Pro. Keeping an old fashioned paper notebook with poker sessions works too, especially for people that are prone to losing phones. Make sure to back up sessions entered into the app in case your phone should break or get lost. These apps may be used for online and brick and mortar poker sessions.

Poker players should also keep a mileage log for their car. A trip requiring long distance transportation should also be tracked. It may seem like a waste now, but it will not be if a big tournament win should come later in the year. You will then be prepared to demonstrate the expenses incurred to get you to that big win.

Disclaimer

This article is meant as an informational tool to help poker players. This article does not take the place of professional tax help. There are many tax attorneys that handle gambling winnings, especially in Las Vegas. Consult one of these tax specialists before filing your taxes if you have gambling winnings to make sure that your deductions are proper and you are filing your taxes correctly.

Image credit: Mark Van Scyoc / Shutterstock.com

Tax Casino Winnings Used Cars

When you gamble, you're probably only focused on winning in the moment. Casino nouveau-brunswick moncton nb. You don't think about what the government might take off the top of your wins.

Of course, the US federal government always wants a cut. It demands 24% of your winnings through federal taxes.

However, states vary on how they tax gambling income. Some are much worse than others due to their high rates.

Casino Gambling Taxes by State

The following guide covers seven states that want a big chunk of your winnings. It also discusses common questions and topics regarding gambling and taxes.

California:

The California casino scene is a thriving land-based gambling industry. It offers 62 tribal casinos, 88 card rooms, and over a dozen horse tracks.

That said, California is definitely a good vacation spot due to its weather and numerous gaming options. But you might take pause on visiting here when considering the extreme tax rate.

California taxes gambling wins as normal income. It collects anywhere from 1% to 13.3% of your winnings. The 13.3% is the highest state tax rate in the US.

Iowa:

Iowa boasts casinos, poker rooms, and sports betting. It charges a 5% flat tax on winnings earned in the Hawkeye State.

Minnesota:

Minnesota offers a wide range of charity gambling establishments and a lottery. The Gopher State may not provide massive Vegas-style resorts, but it does give you some options.

It taxes gambling according to four income brackets (based on married people's income):

1. 35% ($0 to $39,410 annually)
2. 05% ($39,410 to $156,570)
3. 85% ($156,760 to $273,470)
4. 85% ($273,470 and above)

You'll likely fall into the 5.35% bracket if you do profit through gambling. But if you win really big, you'll need to deal with the large 9.85% rate.

New York:

Gambling in New York has grown within the past decade. Its Expanded Gaming Act has added commercial casinos on top of the existing tribal establishments.

You can also enjoy lotteries and poker here too. Assuming you win, though, then you must ante up between 4% and 8.82% for state taxes.

Oregon:

The Beaver State offers lotteries, charity gaming, horse racing, and tribal casinos. It provides more than enough gambling options for its 4.22 million residents.

Oregon doesn't worry about taxing wins worth less than $600. However, it does impose an 8% tax on winnings worth over $600.

Vermont:

Vermont features a unique tax structure that varies based on your winnings. You'll pay a 6.72% rate on wins worth less than $5,000, and 6% on wins worth over $5,000.

Wisconsin:

Wisconsin features 22 tribal casinos and lotteries. The Cheese State requires up to 7.65% in taxes on gambling winnings.

Should You Avoid States With High Gambling Taxes?

You don't necessarily need to avoid states with high gambling taxes—especially when you're interested in a certain casino or sportsbook. However, you should keep this matter in the back of your mind.

Of course, you also want to take other factors into account besides taxes. Here are aspects to think about when determining what state you'll gamble in:

• Convenience/distance – You don't want to drive for hours just to avoid gambling taxes.
• Quality of gambling venues – Playing at the best casinos/poker rooms/sportsbooks can make dealing with high stakes worthwhile.
• Availability of regulated online gambling – You may be focused on using legal online casinos and betting sites above all.
• Your preferred stakes – You probably don't need to worry much about higher taxes if you're just playing quarter slots or $5 blackjack.

What If You Don't Live in the State Where You Win?

Gambling over state lines causes confusion on where to pay taxes. Do you pay your home state or the one where you win?

Typically, you cover taxes in the state where the winnings occur. Your home state, meanwhile, will give you a tax credit for whatever is paid to the other state.

Here's an example:

• You live in Oregon near the California border.
• You cross the border and buy a lottery ticket at a CA gas station.
• You win a $1 million prize.
• As per California's tax laws, the $1 million payout is subject to the highest 13.3% rate.
• You pay $133,000 to the Golden State.
• Oregon only features an 8% tax rate on large gambling wins.
• Therefore, you owe nothing to the Beaver State.

Don't Forget Federal Taxes

Some states don't require you to pay any taxes on gambling winnings. These states include:

• Alaska
• Delaware
• Florida
• Nevada
• New Hampshire

• South Dakota
• Texas
• Washington
• Wyoming

You must pay federal taxes on wins no matter what—even if you live in a state with no gambling taxes. Again, Uncle Sam wants 24% of your winnings.

This percentage is already significant. It becomes even more noteworthy in a state like California, where you could pay up to a 37.3% total tax (24 + 13.3).

You report gambling wins under the 'other income' on Form 1040. The government expects you to report winnings even if you earn just $1.

Of course, you can almost assuredly get away without reporting a tiny payout. However, a gambling establishment requires you to fill out a W-2G form on big prizes.

Casinos, poker venues, and sportsbook issue W-2G's under the following circumstances:

• $600 and above for horse gambling and sports betting wins worth 300x your stake (e.g. $3,000 win / $10 bet = 300x).
• $1,200 and above for slots and video poker wins.
• $1,500 and above for keno wins.
• $5,000 and above for poker-tournament wins.

Remember to Deduct Your Casino Losses

The IRS wants you to report all gambling winnings under any circumstance. State governments that tax gambling payouts expect the same.

However, you can deduct any losses incurred as well. You itemize deductions in a different section of your tax form than where the other income is reported.

Your deduction will be subtracted from whatever you win. Here's an example:

• You win $4,000 at a casino.
• You lose $3,000 while winning this amount.
• You must report the full $4,000 under 'other income.'
• The $3,000 goes under itemized deductions.
• $4,000 – $3,000 = $1,000.
• You'd pay the relevant tax rate on $1k.

More on Itemized Deductions

Itemized deductions constitute expenses that you spend to win money. They differ from a standard deduction, which is basically a lumpsum that's subtracted from your income.

Standard deductions are easier to deal with. Unfortunately, you must use the itemized variety when concerning gambling.

If you're an amateur gambler, meals, hotel stays, entertaining, and gas/plane tickets don't count as deductions. You must be a professional gambler to deduct items like these. Instead, you can only count what you spend on gambling.

Keep Casino Gambling Records

You should keep track of your gambling winnings and casino bankroll as best you can. This way, you have evidence just in case the IRS audits you.

When keeping records, you want plenty of information. Here's an example of five important things you can jot down in your records:

1. Type of gambling/game
2. Date of gambling session
3. Location of the sportsbook/poker room/casino
4. Bankroll at the start of the session
5. Bankroll at the end of the session

In addition to tracking this info, you should also hold onto other documents that you receive. Bank statements, betting tickets, check copies, and W-2G forms are examples of documentation.

What If You Don't Pay Taxes on Gambling Winnings?

You may be tempted to avoid reporting winnings from gambling—especially if the money is insignificant. You'll likely get away with doing so provided you haven't won big enough to receive a W-2G form.

Of course, I don't advise failing to report gambling winnings. But you definitely don't want to avoid reporting wins after receiving a W-2G.

A gambling establishment sends a W-2G copy to the IRS. The latter can easily check this information with their software.

If the IRS catches you not reporting taxes, they'll probably just send a letter and fine you. However, they can take further action if you refuse to cover the taxes.

Conclusion

Claiming gambling winnings on your taxes varies greatly from one state to the next. Some don't charge you a dime while others level a large amount.

Of course, you may not really care about the state tax beforehand. If you do win, though, you'll feel the sting in a state with a high tax rate.

You don't necessarily need to drive hours away just to avoid high taxes on winnings. However, you might consider taxes if you live near the border of two or more states.

California, Minnesota, New York, Oregon, and Wisconsin are currently the five places with the highest rates. If possible, you should avoid these states when gambling for mid or high stakes.