If you've ever won a jackpot in Las Vegas, you probably know that your excitement diminishes at least a little when the casino throws a W-2G tax form in your face. Americans who play at US-based online casinos will usually have to deal with withholding taxes just like in Las Vegas. Yet that only represents a small fraction of your entertainment options. Sadly, it is never safe to assume that your winnings are ultimately tax-free. Yet you may be required to report these gains when you file your taxes in April.
The greatest determinant is the number, size, and frequency of your wins. The actual threshold varies from state to state and whether or not you are an amateur or professional. The main litmus test is the expectation and probability of profit in the eyes of the Internal Revenue Service.
Your success and whether or not you have a regular job on top of gambling may also be factors. With even amateur gamblers having to deal with taxes, professional gambling does have benefits. You can actually deduct your wins from your losses when your treat your gameplay as a business.
No matter what your current status is and how often you play, it's best to keep tabs on your performance to develop strategies, stick to a budget, and simply know where you stand. Whether or not the IRS can actually track your winnings is another matter entirely. Yet you should be aware of your obligations. With a huge budget deficit and ballooning debt, the federal government is looking to fill their financial holes any way they can.
Between the NSA and modern forensic accounting practices, covering your digital tracks is more difficult than it used to be. The United States is a bit of an outlier when it comes to taxing gambling winnings. In the United Kingdom, the government taxes the gross profits of casino operators rather than players.
Canadians can play the lottery, live casinos, poker and online games without paying taxes unless they are a professional. Likewise, Australians and New Zealanders can also gamble tax-free. Nonresident Alien Income Tax Return. Refer to Publication , U. Tax Guide for Aliens and Publication , U. Tax Treaties for more information. Generally, nonresident aliens of the United States who aren't residents of Canada can't deduct gambling losses. For additional information on withholding on gambling winnings, refer to Publication , Withholding of Tax on Nonresident Aliens and Foreign Entities.
To deduct your losses, you must keep an accurate diary or similar record of your gambling winnings and losses and be able to provide receipts, tickets, statements, or other records that show the amount of both your winnings and losses. Refer to Publication , Miscellaneous Deductions for more information. More In Help. Gambling Winnings A payer is required to issue you a Form W-2G, Certain Gambling Winnings if you receive certain gambling winnings or have any gambling winnings subject to federal income tax withholding.
Gambling Losses You may deduct gambling losses only if you itemize your deductions on Schedule A Form and kept a record of your winnings and losses. Recordkeeping To deduct your losses, you must keep an accurate diary or similar record of your gambling winnings and losses and be able to provide receipts, tickets, statements, or other records that show the amount of both your winnings and losses.
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