Do You Have To Pay State Taxes On Gambling Winnings In Oklahoma
- Do You Have To Pay State Taxes On Gambling Winnings In Oklahoma Sooners
- Do You Have To Pay State Taxes On Gambling Winnings In Oklahoma Today
- Do You Have To Pay State Taxes On Gambling Winnings In Oklahoma City
HOW TO FILE YOUR TAXES ON GAMBLING WINNINGS IN OKLAHOMA FROM REAL CPA on this episode of RED SCREEN NINJAS! What do you do after winning a jackpot on a slot. Every state with a state income tax taxes gambling income. The tax rate will depend on what bracket you fall into. Unfortunately, many states do not allow deductions for gambling losses. Some of the states that don’t allow gambling losses are Connecticut, Massachusetts, and Ohio. Gambling income plus your job income (and any other income) equals your total income. Fortunately, you do not necessarily have to pay taxes on all your winnings. Instead, if you itemize your deductions, you can claim your losses up to the amount of your winnings.Note, under the new tax reform law, the gambling loss limitation was modified.
After the thrill of collecting gambling winnings, comes questions about taxes.
Yes, gambling income, which includes winnings from slots, table games, horse racing, sports betting, lottery games, jackpots, and the like, is considered taxable income. As such, you are required to report them on your tax return. The car, boat, or Harley Davidson and other noncash prizes also need to be reported.
There are plenty of questions surrounding Pennsylvania taxes and gambling winnings. Now there are even more with the advent of sports betting, betting apps, and online casinos in Pennsylvania.
Here are some answers.
How much are my gambling winnings taxed?
Casinos withhold 25% of winnings for those who provide a Social Security number. If you do not provide your Social Security number, the payer may withhold 28%.
Currently, Pennsylvania’s personal income tax is a flat tax rate of 3.07% which applies to all taxable income, including gambling and lottery winnings. PA has the lowest rate of all states with a flat tax.
The new regular withholding rate
Effective for taxable years beginning after December 31, 2017, the withholding rate under Section 3402(q) applicable to winnings of $5,000 or more from sweepstakes, wagering pools, certain parimutuel pools, jai alai, and lotteries (formerly 25%) is 24%.
Federal Form W-2G, Certain Gambling Winnings
The organization that pays the winnings, in most cases, the casino, is responsible for sending the recipient of the winnings Form W-2G, Certain Gambling Winnings.
Form W-2G reports the amount of winnings to you as well as to the IRS.
The payer is required to send Form W2G only if the winner reaches the following thresholds:
- The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine
- The winnings (reduced by the wager) are $1,500 or more from a keno game
- The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament
- The winnings (except winnings from bingo, slot machines, keno, and poker tournaments), reduced by the wager, are:
- $600 or more, and
- At least 300 times the amount of the wager
- The winnings are subject to federal income tax withholding (either regular gambling withholding or backup withholding)
How to report PA gambling winnings on taxes
According to the IRS, you must report the full amount of your gambling winnings each year on your federal taxes. First, you report gambling winnings as
You may receive a Form W-2G showing the amount of your gambling winnings and any tax withheld. Include the amount from box 1 as “Other Income” on Form 1040, Schedule 1 (PDF).
That number then goes on your U.S. Individual Income Tax ReturnForm 1040 (PDF), line 7a (designated “Other Income”). You should attach the Schedule 1 form to your Form 1040.
Include the amount shown in box 2 on the W-2G on line 17 (designated as federal income tax withheld) of your Income Tax Return (Form 1040).
Pennsylvania state taxes for gambling
In addition to federal taxes payable to the IRS, Pennsylvania levies a 3.07% tax on gambling income.
You should report your Pennsylvania taxable winnings on PA-40 Schedule T (PDF). Include the total winnings from line 6 of Schedule T on your Pennsylvania Income Tax ReturnPA-40 (PDF), line 8 (“Gambling and Lottery Winnings”).
If your gambling winnings come during a trip to another state or country, you are still required to report.
Michelle Malloy, Esq. at AUA Capital Management, LLC in Conshohocken, Pennsylvania, commented:
“Pennsylvania takes the position that they are entitled to tax a portion of your worldwide income based on certain income items (wages, interests, dividends, capital gains, gambling winnings, lottery winnings, etc).”
What if I don’t receive a Form W2-G?
If you did not receive Form W-2G, your winnings are still considered taxable income and should be reported. A payer is required to issue you a Form W-2G if you receive certain gambling winnings or have any gambling winnings subject to federal income tax withholding.
According to Malloy:
“You are required to report all gambling winnings for federal and Pennsylvania taxes. If you hit a certain threshold they (the casino) will withhold money. In the instance where a casino doesn’t do their job and and fails to send you a W2-G you are still required to report your winnings, or you run the risk of underreporting your taxable income for the year.”
Do I have to pay taxes if a group of people win the lottery?
What happens when a group of coworkers chip in on a lottery ticket that wins? What about you and a friend who put money on a long-shot team to win the championship?
Meet Form 5754 (PDF). Payers use this form to prepare Form W-2G when the person receiving gambling winnings subject to reporting or withholding is not the actual winner or is a member of a group of two or more people sharing the winnings.
Don’t send Form 5754 to the IRS. Keep a copy for your records and return the form to the payer (usually the casino) for preparation of Form W-2G for each person listed as winners.
Are there any deductions available for taxes related to gambling?
Gambling losses can be deducted. However, they must be itemized on line 28 of Schedule A, Form 1040.
Also, you cannot deduct more than your winnings.
Expenses related to any gambling or lottery activities, (like your dinner at the steakhouse, celebratory drinks from the bar, or cost of hotel room) cannot be deducted.
If you are going to deduct gambling losses, keep these records:
- The date and type of each wager
- The name and location of the bet
- The amount won or lost
- Wagering tickets
- Canceled checks
- Credit card records
When using a players club/members card, casinos can track players’ spend. Therefore, you can request a win/loss report that will give you a fairly good sense of your activity in a casino. Online casino players can request the same report and most sites should be able to provide it without issue.
“A lot of people may under-report,” explained Malloy. “They might win $10,000 but have $3,000 of expenses so they think they are just going to report $7,000. That can be an issue, as Pennsylvania does not allow a deduction for expenses. If you win a lot of money in June, for example, you might want to make an estimated tax payment [due Sept. 15 and Jan. 15] so you don’t have an underpayment penalty the following April.”
How to claim gambling winnings and/or losses
Pennsylvania provides a helpful resource to determine how to claim gambling winnings and/or losses.
There is a prompt where you can start a ten-minute interview.
Be sure to have the following information ready:
- Your and your spouse’s filing status
- Amount of your gambling winnings and losses
- Any information provided to you on a Form W-2G
Taxes on multistate lotteries
The Pennsylvania Department of Revenue considers multi-state lottery prizes, like those from Powerball and Mega Millions, awarded on tickets purchased through a licensed Pennsylvania state lottery ticket vendor, a prize by the Pennsylvania Lottery.
“Such prizes are considered Pennsylvania source income and both residents and nonresidents are subject to tax on such income if the prize is a cash prize. Multistate lottery prizes awarded on tickets purchased through a vendor in another state lottery are considered prizes awarded by that state lottery. Such prizes are not considered Pennsylvania source income and only residents are taxed on such income regardless of whether the prize is a cash or noncash prize.”
Due to a 2016 law change, any cash prize won from a Powerball of Mega Millions ticket in any state is taxable for state purposes, in addition to federal taxes.
What happens if you win a few thousand dollars on a winning PA lottery ticket?
Lottery winnings are included in taxable income. Pennsylvania Lottery winners of an individual prize valued at more than $600 will receive a Form W2-G by mail.
If your spouse also wins, they must report their winnings separately.
“For a significant windfall, like over $5 million, it definitely makes sense to talk to an attorney or accountant to determine if they should take a lump sum payout or annuity. They may also need to think about estate tax planning, financial planning and/or asset protection planning for their windfall,” said Malloy.
Sports betting winnings and taxes
Sports betting winnings are taxable income.
The IRS states:
“Gambling winnings are fully taxable and you must report the income on your tax return. Gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips.”
Even though sports betting isn’t specifically listed, it falls under the umbrella of “gambling winnings.”
Wherever your sports betting win occurred – at the OTB, the casino, on a sports betting app – they payer should send Form W-2G.
Sports betting losses might also be used as deductions if you itemize your deductions and keep a detailed record of wins and losses.
Based on your tax bracket, sports bettors in Pennsylvania could owe up to 35 % of winnings to the federal government in addition to the 3.07 % Pennsylvania taxes net gambling winnings.
Online gambling and taxes
Sports betting apps and online casinos provide unmatched convenience. You may also enjoy the anonymity of playing behind a screen name instead of in person. However, it still comes with the same tax responsibilities. Online gambling winnings are considered taxable income at the same rate as other gambling winnings.
For online gambling winnings, the payer is required to send Form W2G only if the winner reaches the following thresholds:
- The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine
- The winnings (reduced by the wager) are $1,500 or more from a keno game
- The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament
- The winnings (except winnings from bingo, slot machines, keno, and poker tournaments), reduced by the wager, are:
- $600 or more, and
- At least 300 times the amount of the wager
- The winnings are subject to federal income tax withholding (either regular gambling withholding or backup withholding)
In terms of deductions for taxes, players can request a report from online casinos detailing wins and losses.
Taxes are probably the last thing on your mind during an exciting gambling session. However, they inevitably come up following a big win or profitable year.
You may have two main questions at this point:
- Do I need to pay taxes on my wins?
- If so, how much do I have to pay?
The following guide discusses whether your gambling wins are taxable and other important topics regarding this subject.
The Short Answer Is Yes
I’ll cut right to the chase: yes, you do need to pay federal taxes on gambling winnings in the United States. This is especially true when you net a big win and receive a W-2G form.
According to the IRS, a gambling establishment should issue a W-2G when you win an amount that’s subject to federal income tax withholding (24% of win).
Slot machines present a famous example of when you’ll receive a W-2G form after winning so much. Casinos must issue a form when you win a prize worth $1,200 or more through slots or video poker.
As for the second point, a sportsbook or racetrack must withhold federal taxes when you win a bet worth 300x your initial stake. If you wager $5 and win $3,000, for example, then the bookmaker will issue a W-2G form and withhold $720 (24%).
Here’s a broader look at the W-2G and tax withholding threshold for different types of gambling:
- $600+ through sportsbooks and racetracks (provided it’s 300x your stake).
- $1,200+ through a slot machine, video poker machine, or bingo game.
- $1,500+ through keno.
- $5,000+ through a poker tournament.
All Winnings Are Subject to Taxation
Technically, you’re supposed to report any gambling winnings—big or small. Even if you win $20 in an office betting pool, the IRS wants to know about it.
If you want to stay above board, then you should report all wins on Form 1040 (under “other income”). As I’ll cover later, you can deduct losses from winnings as well.
Furthermore, any amount that’s withheld by a casino, poker room, sportsbook, or racetrack is deducted from what you owe. Gambling establishments keep 24% of a win when they do withhold money.
W-2G Forms Don’t Apply to Table Games
You’ll receive a W-2G when earning big wins through most types of gambling. However, casino table games are an exception to the norm.
Unlike a jackpot game (e.g. video poker) or a poker tournament, casinos have no idea how much money you start with in a table game. Therefore, they can’t really determine when you do and don’t experience big wins.
Examples of table games that are exempt from W-2G forms include:
- Baccarat
- Blackjack
- Caribbean stud
- Craps
- Roulette
- Three-card poker
The IRS still expects you to pay taxes on profits earned through table games. Again, though, the casino can’t issue a W-2G because they can’t tell how much money you’ve actually won.
Some States Tax Gambling Winnings
Most states tax your income, including gambling winnings. Depending upon where you live, you’ll probably need to pay taxes to both the IRS and your state.
For Example:Michigan features a 4.25% flat income tax. The Wolverine State expects you to pay this same 4.25% rate on gambling wins.
West Virginia, on the other hand, doesn’t tax your winnings. Casinos/sportsbooks in the Mountaineer State only withhold federal taxes (when necessary).
Assuming you travel to another state to gamble, you may have two states wanting taxes. Luckily, though, you won’t be subject to double taxation.
Instead, your home state will give you credit for whatever taxes are paid to the state where the winnings occurred.
Can You Deduct Losses?
You can deduct gambling losses from winnings. However, these deductions are itemized rather than standard deductions.
Here’s an example to explain:
- You win $5,000 through sports betting.
- You lose $4,500.
- You must report the full $5,000—not $500 (5,000 – 4,500)—under other income.
- Meanwhile, the $4,500 is reported through various itemized deductions.
In short, itemized deductions are expenses that reduce your taxable income. The standardized variety includes flat-dollar, common deductions.
You may be able to save more money through itemized deductions. However, standard deductions are easier to deal with and also have the potential to save you more money.
Regardless, you must use itemized deductions when dealing with losses. This means spending more time on your tax returns or working with an accountant.
Keep in mind that you won’t receive a tax refund for gambling losses. Instead, you can only deduct an amount equal to your winnings each year. If you win $3,500, for example, then you can’t deduct more than $3.5k and expect a return.
Keep Records on Wins & Losses
The IRS may take your word at face value when it comes to gambling. Of course, they also have the ability to audit you when they deem it necessary.
That said, you don’t want to guestimate on your wins and losses. Instead, you want proof through the form of records.
Journals offer a great way to record your gambling activities. You can log the following for each entry:
- Date of gambling session
- Location of the establishment
- Game played
- Starting bankroll
- Ending bankroll
Such entries don’t guarantee you’re being honest. However, they at least show the IRS that you’re making a legitimate attempt at recordkeeping.
You can take your recordkeeping efforts even further by holding onto any other relevant documents. Betting slips, winning tickets, canceled checks, bank statements, W-2G forms, and anything else of relevance are all worth saving.
What Happens If You Don’t Report Gambling Winnings?
The IRS fully expects you to report gambling winnings and especially annual profits. They don’t take kindly to you failing to report these wins.
Of course, you’re unlikely to draw an audit for winning a $25 sports bet. You stand a higher chance of being audited, though, if you win enough for a W-2G form.
In this case, the casino/sportsbook/racetrack also sends a copy of the from to the IRS. The latter features reliable software that can match up your reported income with documentation of nonreported income.
Assuming you fail to report gambling winnings, then the IRS may do little more than send a letter and issue a small fine. You should definitely pay up, or at least work out a payment plan, in this case.
You’ll face more serious consequences, though, if you fail to report a huge win and lie about the matter when/if caught. Refusal to pay and/or heavy efforts to cover up the deceit will lead to bigger fines and possibly jail time.
Gamblers Stand Increased Chances of an Audit
Nobody likes attracting an audit from the IRS. Unfortunately, the chances of being audited increase for gamblers.
This is especially true when you net a big win and receive a W-2G. Of course, you can reduce the odds of being audited by claiming anything on the form.
The IRS may also become suspicious if you claim big losses on your tax return. You’ll put the taxman on increased alert when winning a huge prize (e.g. $50,000) and claiming a matching amount of losses.
Also, you can’t write off hotel stays, meals, and entertainment as a casual gambler. You must be a professional to claim such itemized deductions.
How Do Professional Gamblers Report Winnings?
Pro gamblers claim winnings on Schedule C as a self-employed person rather than as other income on Form 1040.
Even as a professional, you can’t deduct more losses than winnings in a year. You’re stuck in a tough situation with treating gambling as a day job, yet not being able to file losses that exceed winnings.
As mentioned before, though, you’re able to deduct business expenses like hotel stays and meals. These expenses just need to be a legitimate part of your business.
Conclusion
Do You Have To Pay State Taxes On Gambling Winnings In Oklahoma Sooners
In answer to the original question, yes, you’re supposed to claim real money gambling winnings on federal tax forms. Even if you end up losing money on the year, the IRS wants to see your wins and losses.
Of course, tax collectors don’t care a great deal when you win $200 on the year. They spend most of their time looking for bigger winners.
Do You Have To Pay State Taxes On Gambling Winnings In Oklahoma Today
The times when you want to be especially diligent in this matter include:
- When you book a large win and receive a W-2G form.
- If you win a significant amount of profits throughout the year.
- When you win 600x your bet with a sports or horse wager.
Again, the IRS and your state (if applicable) expect all gambling winnings to be reported. But you can use some commonsense in deciding when reporting wins are truly necessary.