Tax Obligations for Casino Winnings: A Settlement Matter
In the rapidly evolving world of gambling, the advent of mobile betting and in-game betting has led to an increase in winnings, which in turn means more W-2G forms being issued by casinos and payers.
What is a W-2G and why is it important?
A W-2G is a tax form that reports gambling winnings to both you and the Internal Revenue Service (IRS). It is generally required when your winnings exceed specific thresholds, such as $1,200 for slot machines or bingo, $1,500 for keno, and $5,000 for poker tournaments. However, for winnings under $1,200, no W-2G is issued, but you are still required to report all gambling winnings as "other income" on your federal tax return.
Tax Rates and Withholding
Federal Withholding is 24 percent on cash, but rises to 33 percent on prizes like cars or boats. For US citizens, the withholding rate is 24 percent on a W-2G, while for non-citizens, it is 30 percent. If you decline to provide a W-9, backup withholding will be withheld at a 28 percent tax rate.
Recent Changes and Future Regulations
Recent laws are set to raise some reporting thresholds, such as slot machines from $1,200 to $2,000, but these changes will not take effect until the IRS issues implementing regulations, expected from 2026 onward.
Cash Games and Sports Betting
Cash games in poker do not generate W-2Gs, but tournament wins over $5,000 will have the casino or card room filling out paperwork. More than 25 states have legalized sports betting since 2018, bringing in tens of millions in new tax revenue. Wins on sports betting or horse racing also generate W-2Gs for payouts of 300 to 1 or more and at least $600.
Identification and Form W-9
Casino staff will request identification and a Form W-9 if they don't already have one on file for you. Not receiving a W-2G does not mean you won't be liable for taxes on your winnings.
Poker as a Business
Many professional poker players treat poker as a business, even going as far as opening an LLC to write off losses against wins and deduct expenses. In cases where the payout is less than $5,000, they will ask whether you want federal taxes withheld.
In-Game Betting
In-game betting allows bets on various outcomes during each game, like whether the next play will be a pass or a run or whether the next batter will strikeout.
In summary, it is crucial to understand the tax implications of gambling winnings in the US. All winnings must be reported on your federal tax return, even if you do not receive a Form W-2G, but the form itself is issued only when the amount meets the IRS thresholds. For winnings under $1,200, you are still required to report all winnings as "other income."
In the realm of personal-finance and taxes, it's essential to know that a W-2G form, a tax document reporting gambling winnings, is necessary when winnings exceed specific thresholds. For instance, a W-2G is issued for poker tournament winnings surpassing $5,000, slot machine winnings above $1,200, or keno winnings exceeding $1,500.
As the gambling industry evolves with innovations like in-game betting and mobile betting, understanding the tax implications of such winnings is becoming increasingly important. Being aware of W-2G forms and their reporting thresholds can help maintain compliance with the Internal Revenue Service (IRS) and facilitate personal-finance management.
