• How Much Taxes Do I Pay On Casino Winnings
• How Much Tax Is Paid On Casino Winnings List
• How Much Tax Do I Pay On Casino Winnings
• How Much Tax Do You Pay On Gambling Winnings
• How Much Tax Do You Pay On Casino Winnings
• How Much Tax Do I Pay On Gambling Winnings

Tax on lottery winnings in South Africa. The short answer is no, lotto, cash winnings, prizes and the sale of these type of tickets are not subject to tax in South Africa if they are conducted or authorized within the laws of South Africa. The Lotto is licensed by the government and is essentially tax free. I believe any big winnings where they must come and pay you, you will be taxed on. Small winnings the machine pays, no. My dad has a US social security number which he has used at casinos to get away from paying the taxes (mostly small casinos or outside of Vegas) but for him it has never worked in Vegas (from what I know). All casino winnings are subject to federal taxes. However, the IRS only requires the casinos to report wins over $1,200 on slots and video poker machines or other games such as keno, lottery or horse racing. When you have a win equal to or greater than $1200, you are issued a W-2G form. This form lists your name, address and Social Security number.

Whether you’re sitting on a pile of cash you recently won or, like most people, you’re just dreaming, you may not know how taxes will come out of your winnings. You’ll owe on your prizes, whether they’re in the form of trips, a new car or cold hard cash. Before you even pick up your prize, though, you may see taxes taken off the top, which can be a problem if you win a non-cash prize, since you may owe tax dollars before you even claim the item. Understanding what to expect can make it less of a shock when you do claim your windfall.

Tip

The Numbers If you’ve earned your winnings at a gambling facility, that facility will actually issue you a tax form for those winnings at the start of tax season. However, this only happens if you win $600 or more (or if you’ve won at least 300 times at that facility). The second rule is that you can’t subtract the cost of gambling from your winnings. For example, if you win $620 from a horse race but it cost you $20 to bet, your taxable winnings are $620, not $600 (after subtracting your $20 wager). Cash is not the only kind of winnings you need to report. Gambling winnings are subject to federal and Minnesota income taxes. This includes winnings from the Minnesota State Lottery and other lotteries. You’re responsible to report and pay income tax on all prizes and winnings, even if you did not receive a federal Form W-2G. But if you took the full payout, you’ll be responsible for paying the remaining percentage. With the new tax brackets, that means you’ll owe 37 percent on your winnings, minus the 25 percent you’ve already paid, for a total of 12 percent.

The taxes you pay on prize money depend on the amount you win, the state where you win it and the type of prize.

Calculate Taxes on Winnings

Winnings are taxed as ordinary income, so you’ll pay the IRS just as you would pay on the money you earned through any other source. But unlike work earnings, you may not be handed a form from the prize issuer, which means you’ll need to track your winnings and claim them yourself. You’re technically supposed to report even the smallest winnings and pay taxes on them, but prize issuers are required to report winnings of $600 or more to the IRS using Form W2-G. You will then get a total of what you won on Form 1099-MISC at tax time. The amount you won will be listed in Box 3, Other Income.

When you’re filling out your Form 1040, you’ll input the information from your 1099 on Line 21, Other Income. You’ll add it to any other miscellaneous income you’re claiming for the year. Your winnings will be taxed along with your other income, following the rate that goes along with your tax bracket. If you’re accustomed to paying a certain tax rate, it’s important to be aware that your winnings can throw you into a higher tax bracket, which means you may have a bigger tax bill than you’re used to in April. Paying 24 percent of a $1,000 prize is one thing, but if you’re suddenly paying an additional 2 percent on everything you earn within that bracket during the tax year, you’ll likely feel the tax liability much more.

Winnings and Tax Brackets

To better calculate the tax on winnings, you should familiarize yourself with the tax brackets, especially since they’ve shifted under the Tax Cuts and Jobs Act. If you’re an individual filing singly and your income falls in the $38,701 to $82,500 range, you’re in the 22 percent tax bracket, which means you’re responsible for handing the IRS 22 percent of your earnings within that tax bracket. If you’re filing as a couple, though, you’ll only qualify for the 22 percent tax bracket if you make between $77,401 to $165,000.

If you’re on salary throughout the year, your employer pulls taxes out of your earnings and submits them to the IRS. This means when you file at the start of the next year, you’re basically making sure you’ve paid enough in throughout the year. Where are there mega millions slot machines. If you haven’t, you’ll owe extra, but if you paid in too much, you’ll get a refund check. If you win $2,000 at the horse track, but your salary is $82,000, you’ll suddenly find yourself in the 24 percent tax bracket, which applies to earnings of $82,501 to $157,500. This could increase your tax bill or result in a smaller refund when you file. If you win millions in the Powerball, it will automatically throw you into the highest tax bracket, forcing you to pay 37 percent in taxes on all income within that tax bracket.

Off-the-Top Taxes

Part of the taxes on prize money you’ll pay will be handled for you, provided you win more than $5,000. The IRS requires 25 percent to be withheld on any prize of that value, which means when you pick up your check, you’ll see a lower value than you’d expected. But in some states, there are local laws regulating the amount that will be withheld. New York is one of those states, and it’s the state where you’ll see the least cash in hand if you win money.

So how does this work if you win a noncash prize? This is where it can get sticky. If you win a cash prize with a fair market value of more than $5,000, the organization can simply withhold the 25 percent from what they give you. If, on the other hand, you win a new car or high-value piece of jewelry, there’s nothing for the prize issuer to withhold. This means, before you can take the item, you’ll be required to pay 25 percent of its value.

State Taxes on Lottery Winnings

The federal government isn’t the only authority you’ll have to pay if you win. Just as you’re supposed to report your winnings as income to the IRS, the same rules apply to the states that tax winnings. The highest tax rate is in New York, which takes 8.82 percent of winnings. Maryland and D.C. are also at the top of the highest tax list when it comes to prizes.

To maintain as much of your winnings as possible, it helps to live in a state that doesn’t tax winnings at all – 10 states, Puerto Rico and the U.S. Virgin Islands don’t tax lottery winnings. So, you would only need to worry about the part of your prize the IRS wants. If you buy your ticket in a different state than the one where you live, you’ll need to pay close attention to whether the government overseeing the purchase location charges state taxes for nonresidents who win. Some states only charge taxes on lottery winnings distributed to those who live in the state.

Casino and Gambling Winnings

If you log serious time at the casino, you’re likely familiar with gambling tax. You’re supposed to claim every dollar you make under other income on your 1040, even if you just win $10 on a slot machine. But there’s a point when the IRS really starts to care about your winnings. The IRS has strict reporting thresholds for certain types of winnings. Those are:

• $600 or more at a track if the winnings are at least 300 times your bet
• $1,200 or more if you win at bingo or a slot machine
• $1,500 or more in keno winnings
• $5,000 at poker

Once your gambling winnings reach one of those thresholds, the casino will withhold 25 percent of what you won and report the winnings to the IRS using Form W2-G. You’ll get a 1099 form and, if funds are withheld from your winnings, you’ll also receive a copy of WG-2. Your casino and other gambling winnings may be subject to state income tax.

Understanding Lottery Winnings and Annuities

Lotteries are taxed similarly to other types of prize winnings, as long as you take it in a lump sum. With the tax brackets, though, this can throw you into a tax bracket where you’re losing half your winnings before the money is even in your account, between state and federal taxes. Experts advise visiting with a tax attorney or financial planner to discuss the best options for you before taking your payment.

The only alternative to a lump-sum payment is to take your lottery winnings as an annuity. This involves taking your prize in installments, rather than all at once. If you took a $1 million jackpot in 20 installments of $50,000, you’ll save nearly $250,000 over a 20-year period. The government gets to keep its money and earn interest on it and you still get $50,000 a year, so it’s a win for both parties.

Navigating Non-Cash Prizes and Taxes

A prize tax isn’t only applied to cash winnings. You’ll owe the same taxes if you win a car, house, luxury vacation or any number of other items. It just gets a little more challenging for you, since you may not have the extra cash on hand to fork over. Sure, you could sell the prize and use the money to pay taxes and pocket the rest, but what if you want to pull together the money so you can enjoy your new item?

In addition to the taxes you’ll have to pay, you should also consider the ongoing costs of owning the item. That $1 million home you see listed as a “dream home” on TV comes with a hefty tax bill long after you move in. Not only will you pay federal taxes on the hundreds of thousands of dollars on your winnings, but property taxes on a $1 million home can be more than the average mortgage. Add to that the cost of homeowner’s insurance, utilities and living in an area with a higher cost of living, and that dream house can quickly become a financial nightmare.

Itemizing Deductions

You may have heard talk that you can deduct the money you’ve spent on lottery tickets on your taxes. This only applies if you win, and the same goes for gambling expenses. If you win, you can claim what you spent gambling or buying scratch-offs during that tax year, up to the amount of your winnings. But there’s a catch: to claim your gambling or lotto expenses, you’ll need to have a detailed record of every dime you’re deducting. That may not be easy if you don’t carry a notebook around the casino or you tend to buy lottery tickets on impulse. Your diary should include the following information:

• The date and type of each wager.
• The name and address where you made the wager.
• The name of anyone with you when you made the wager.
• The amount you won or lost.

You can’t simply report your winnings, deducting the amount you spent throughout the year. You’ll need to input your winnings under Other Income, then detail your losses on Schedule A, Line 28. Gambling losses include, but aren’t limited to, bingo, lottery and raffle tickets.

Paying Estimated Taxes

If you win a fairly sizable prize ­– cash or noncash – it might be well worth it to determine whether you should pay estimated taxes. These are paid four times a year, allowing you to pay a little of the taxes you’ll owe in April early. If you think you may owe more than $1,000 in April, it’s time to consider estimated taxes. If you wait until April, you’ll be seen as having underpaid your taxes and you may owe penalties in addition to the taxes due.

Paying four times throughout the year rather than all at once can also help you come up with the taxes on your prize. You’ll be able to divide the amount by four and pay a little as you go. You can submit a payment to the IRS at any time using your Social Security number and it will be applied to your account. Quarterly payments are due by mid-April, mid-June, mid-September and mid-January and must be mailed to the filing address for where you live. You can also pay online or by phone.

About the Author

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.

Do you like to gamble? If so, then you should know that the taxman beats the odds every time you do. The Internal Revenue Service and many states consider any money you win in the casino as taxable income. This applies to all types of casual gambling – from roulette and poker tournaments to slots, bingo and even fantasy football. In some cases, the casino will withhold a percentage of your winnings for taxes before it pays you at the rate of 24 percent.

Casino Winnings Are Not Tax-Free

Casino winnings count as gambling income and gambling income is always taxed at the federal level. That includes cash from slot machines, poker tournaments, baccarat, roulette, keno, bingo, raffles, lotteries and horse racing. If you win a non-cash prize like a car or a vacation, you pay taxes on the fair market value of the item you win.

By law, you must report all your winnings on your federal income tax return – and all means all. Whether you win five bucks on the slots or five million on the poker tables, you are technically required to report it. Job income plus gambling income plus other income equals the total income on your tax return. Subtract the deductions, and you'll pay taxes on the resulting figure at your standard income tax rate.

How Much You Win Matters

While you're required to report every last dollar of winnings, the casino will only get involved when your winnings hit certain thresholds for income reporting:

How Much Taxes Do I Pay On Casino Winnings

• $5,000 (reduced by the wager or buy-in) from a poker tournament, sweepstakes, jai alai, lotteries and wagering pools.
  
• $1,500 (reduced by the wager) in keno winnings.
  
• $1,200 (not reduced by the wager) from slot machines or bingo
  
• $600 (reduced by the wager at the casino's discretion) for all other types of winnings but only if the payout is at least 300 times your wager.
  

Win at or above these amounts, and the casino will send you IRS Form W2-G to report the full amount won and the amount of tax withholding if any. You will need this form to prepare your tax return.

Understand that you must report all gambling winnings to the IRS, not just those listed above. It just means that you don't have to fill out Form W2-G for other winnings. Income from table games, such as craps, roulette, blackjack and baccarat, do not require a WG-2, for example, regardless of the amount won. It's not clear why the IRS has differentiated it this way, but those are the rules. However, you still have to report the income from these games.

What is the Federal Gambling Tax Rate?

Standard federal tax withholding applies to winnings of $5,000 or more from:

• Wagering pools (this does not include poker tournaments).
  
• Lotteries.
  
• Sweepstakes.
  
• Other gambling transactions where the winnings are at least 300 times the amount wagered.
  

If you win above the threshold from these types of games, the casino automatically withholds 24 percent of your winnings for the IRS before it pays you. If you cannot provide a Social Security number, the casino will make a 'backup withholding.' A backup withholding is also applied at the rate of 24 percent, only now it includes all your gambling winnings from slot machines, keno, bingo, poker tournaments and more. This money gets passed directly to the IRS and credited against your final tax bill. Before December 31, 2017, the standard withholding rate was 25 percent and the backup rate was 28 percent.

The $5,000 threshold applies to net winnings, meaning you deduct the amount of your wager or buy-in. For example, if you won $5,500 on the poker tables but had to buy in to the game for $1,000, then you would not be subject to the minimum withholding threshold.

It's important to understand that withholding is an entirely separate requirement from reporting the winning on Form WG-2. Just because your gambling winning is reported on Form WG-2 does not automatically require a withholding for federal income taxes.

Can You Deduct Gambling Losses?

If you itemize your deductions on Schedule A, then you can also deduct gambling losses but only up to the amount of the winnings shown on your tax return. So, if you won $5,000 on the blackjack table, you could only deduct $5,000 worth of losing bets, not the $6,000 you actually lost on gambling wagers during the tax year. And you cannot carry your losses from year to year.

The IRS recommends that you keep a gambling log or spreadsheet showing all your wins and losses. The log should contain the date of the gambling activity, type of activity, name and address of the casino, amount of winnings and losses, and the names of other people there with you as part of the wagering pool. Be sure to keep all tickets, receipts and statements if you're going to claim gambling losses as the IRS may call for evidence in support of your claim.

How Much Tax Is Paid On Casino Winnings List

What About State Withholding Tax on Gambling Winnings?

There are good states for gamblers and bad states for gamblers. If you're going to 'lose the shirt off your back,' you might as well do it in a 'good' gambling state like Nevada, which has no state tax on gambling winnings. The 'bad' states tax your gambling winnings either as a flat percentage of the amount won or by ramping up the percentage owed depending on how much you won.

Each state has different rules. In Maryland, for example, you must report winnings between $500 and $5,000 within 60 days and pay state income taxes within that time frame; you report winnings under $500 on your annual state tax return and winnings over $5,000 are subject to withholding by the casino due to state taxes. Personal tax rates begin at 2 percent and increase to a maximum of 5.75 percent in 2018. In Iowa, there's an automatic 5 percent withholding for state income tax purposes whenever federal taxes are withheld.

How Much Tax Do I Pay On Casino Winnings

State taxes are due in the state you won the income and different rules may apply to players from out of state. The casino should be clued in on the state's withholding laws. Speak to them if you're not clear why the payout is less than you expect.

How to Report Taxes on Casino Winnings

You should receive all of your W2-Gs by January 31 and you'll need these forms to complete your federal and state tax returns. Boxes 1, 4 and 15 are the most important as these show your taxable gambling winnings, federal income taxes withheld and state income taxes withheld, respectively.

You must report the amount specified in Box 1, as well as other gambling income not reported on a W2-G, on the 'other income' line of your IRS Form 1040. This form is being replaced with a simpler form for the 2019 tax season but the reporting requirement remains the same. If your winnings are subject to withholding, you should report the amount in the 'payment' section of your return.

Different rules apply to professional gamblers who gamble full time to earn a livelihood. As a pro gambler, your winnings will be subject to self-employment tax after offsetting gambling losses and after other allowable expenses.

How Much Tax Do You Pay On Gambling Winnings

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How Much Tax Do You Pay On Casino Winnings

How Much Tax Do I Pay On Gambling Winnings

About the Author

Jayne Thompson earned an LLB in Law and Business Administration from the University of Birmingham and an LLM in International Law from the University of East London. She practiced in various “big law” firms before launching a career as a commercial writer. Her work has appeared on numerous financial blogs including Wealth Soup and Synchrony. Find her at www.whiterosecopywriting.com.