Taxes on Winnings - FAQ

Indeed, your winnings are subject to taxation. It's up to you to report this income, as casinos aren't required to inform the IRS about your earnings. The same rule applies to all net gambling winnings, regardless of how or where they were earned.

Deciding whether to take out all your winnings at once is entirely up to you. If you're a citizen of the U.S., you must report this income on your next tax filing. Failure to do so may lead to accusations of tax evasion. Nonetheless, since the system primarily relies on honesty, many choose not to disclose their gambling wins. Additionally, you can offset your reported winnings with any gambling losses incurred within the same tax year.

Unfortunately, there isn't a limit for deducting net losses. However, if you possess any W2G forms, typically issued for winnings of $1200 or more from slots, video poker, or keno, you can offset losses against these winnings. It's essential to keep accurate records for any losses you wish to claim. You might be confusing this with stock losses, where you can deduct up to $3000 annually and carry forward any excess to subsequent years. I'm still offsetting losses from the tech market crash back in 2000.

When engaging in high-stakes video poker, W2G forms become an important consideration. While you still owe taxes on your net winnings at the end of the fiscal year, irrespective of the number of W2G forms you receive, any payout of $1200 or more necessitates a waiting period, along with the expectation to tip the person assisting you. In less upscale casinos, this can also attract the attention of would-be tippers. To circumvent these complications, players sometimes opt to adjust their strategy. For instance, when playing AAA88 in 10/7 double bonus, statistically, the optimal choice is to retain only the aces. But in a game where stakes are between $2 and $10, hitting four aces surpasses $1200, thus triggering a W2G scenario, whereas securing a full house would remain under that threshold. From a tax perspective, choosing the full house is the more practical play.

To address your question, let’s assume that four of a kind pays 25 times the bet. If you’re playing a 50-hand game at $0.20, a four of a kind would payout $0.20 multiplied by 5 times 50 times 25, totaling $1250. Statistically, you'd expect to get a four of a kind dealt approximately every 4165 hands. However, should you reduce the number of hands to 47, the payout for a four of a kind would then amount to 47 times $0.20 times 5 times 25, equaling $1175, thereby staying below the W2G reporting threshold.

Generally, the standard procedure at most casinos for significant payouts allows you to receive your winnings in whichever manner you prefer. However, it's crucial to realize that casinos will ask for your Social Security number for transactions involving $10,000 or more, and they will maintain records of that transaction.

Any gambling winnings are indeed taxable. However, players at table games are generally trusted to self-report. A W2G form may only be generated if a win occurs at 300 to 1 odds or higher and exceeds $600, which is primarily a concern for progressive jackpots. Additionally, if a cash transaction exceeds $10,000, the casino has to complete a Cash Transaction Report (CTR), but this is not a significant worry, as many high-stakes players seem overly cautious about them.

Only individual wins of $1200 or more are subject to withholding tax. If your total winnings from multiple smaller wins exceed $1200, it won't trigger withholding. When you hit the cash out button, the machine doesn't consider your citizenship and simply generates a voucher for your total amount. Any win of $1200 or above will always lock the machine until an employee comes to unlock it. For high-denomination games starting at $10 or $25, casinos typically keep a record of all your taxable wins. In situations with a $500 machine, there’s likely to be an employee right beside to handle paperwork. When you finish playing, they will provide a single W2G form reflecting the total, and the withholding tax will be deducted from that amount.

The determination for a W2-G is based on the total win, not the net result. Thus, if the player achieves a $5000 push on a Red, White & Blue slot, they will indeed be issued a W2-G.

In the United States, any and all gambling winnings, regardless of the amount, are taxable. However, with table games, it generally operates based on the honor system for self-reporting.

I shared this situation with Brian, a former gaming regulator who is currently a casino manager. Here’s his response:

The casino would not be privy to whether someone is in the country without legal permission. If the person possesses a valid passport, the jackpot payout would be honored. However, they might be unaware of this due to fear or if they lack the necessary identification. For winnings of $1,200 or more, ID is required for taxation. If someone doesn’t produce their ID, the jackpot would be held safely in the casino's cage until they come to claim it. Typically, someone may forget their ID, but there can also be cases where individuals aren't of legal gambling age. If they fail to claim their winnings, that money must be returned to revenue because the jackpot deduction was never completed or other regulations may apply. Furthermore, like the U.S., many nations impose taxes on worldwide income. Therefore, the U.S. has treaties with various countries to report gambling winnings, ensuring Uncle Sam receives his share.

This delves outside my expertise, but I'll do my best to assist. According to the IRS website, the U.S. has tax treaties with the following nations: Austria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Russian Federation, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom. Notably, New Zealand is absent from this list.

If you are a resident of one of the countries mentioned above and score a jackpot of $1,200 or more, you should request to complete a W8BEN form. This could significantly reduce, or even eliminate, the withholding tax.

Even if you are not from one of the specified countries or don't fill out the form, you can reclaim the withholding by submitting a 1040NR form, or opting for the simpler 1040NR-EZ version.

My personal tax advisor is Marissa Chien EA, the author of Tax Help for Gamblers. She excels at her job, though some might view her fees as high. For a 1040NR, she typically charges around $1,000, but she emphasizes that most people make errors on this form. .

IRS PDF’s:

• 1040NR-EZ instructions (PDF)
• 1040NR-EZ form (PDF)
• 1040NR instructions (PDF)
• 1040NR form (PDF)
• W8BEN instructions (PDF)
• W8BEN form (PDF)

You can find Marissa on Twitter under the handle @taxpro4gamblers, where she sometimes responds to followers' inquiries about tax-related issues.

Title 31 is a federal regulation that mandates casinos to keep records of any cash transactions exceeding $10,000 made by a single individual in one day. If someone reaches this threshold, a Cash Transaction Report (CTR) must be submitted. This requirement also applies if multiple transactions sum up to over $10,000. If you attempt to cash out close to but under the $10,000 limit, the casino may also take note to prevent any future cash-outs that exceed the limit later the same day.

My recommendation is to comply with their requests. It is more concerning if you appear to be evading CTRs than the CTRs themselves. In reality, legitimate CTRs should not be feared; casinos regularly file many of them. In my experience, I have filed hundreds without any known negative consequences. However, if you seem to be trying to evade the process, you attract unnecessary attention. I am aware of someone who faced challenges cashing in chips after consistently withdrawing amounts just below $10,000. For more insight, I suggest reaching out to Brian, a current casino manager in Las Vegas and former regulator, who can shed light on these procedures.

To summarize, Title 31 is a regulation enacted by the U.S. Department of the Treasury aimed at combating money laundering. It stipulates that certain significant cash transactions must be reported to the government, specifically through FinCEN Form 103 known as Currency Transaction Reports by Casinos (FinCEN stands for the Financial Crimes Enforcement Network). According to this rule, casinos must report any cash transactions that exceed $10,000 within a single day. Note that the definition of a 'day' is flexible; casinos determine their operational day, such as from 3 a.m. to 2:59 a.m.

All financial institutions are obligated to adhere to Title 31, and casinos fit this classification due to the nature of their transactions, which mirror banking activities (like check cashing and cash exchanges). Unlike traditional banks, casinos frequently engage with patrons whose backgrounds are unknown. When you establish a checking account, you provide personal information necessary for CTRs. However, when cashing in chips at a casino, the only way for them to gather such information is by asking. They need to collect all relevant details to complete a CTR before you exceed the $10,000 threshold. Given the potential fines for non-compliance, casinos are meticulous in following these regulations.

Casinos are cautious about sharing too much information regarding Title 31, worried they might unintentionally breach the law. They are explicitly prohibited from assisting patrons in arranging their transactions to evade reporting obligations. When queries arise, they often direct customers to a preloaded information card rather than engaging in detailed discussions to avoid revealing sensitive information.

While it may seem easy to bypass Title 31 for undocumented transactions like chip purchases or redemptions, it's important to consider the consequences. If a casino suspects that you are intentionally attempting to evade reporting requirements, they are required to file a Suspicious Activity Report by Casinos (SARC). If they find that you've gone over the $10,000 limit without providing the required information, they will prevent you from gambling until they obtain it. — Brian

Here is what the bill says:

For individual taxpayers, excluding corporations, an additional tax of 5.4 percent applies to the portion of modified adjusted gross income that exceeds $1,000,000. -- Section 59C(a) page 337 H.R. 3962 (PDF — 3270 KB) or CNN.com

The proposed surcharge would be applied prior to deducting any gambling losses. I confirmed this with Marissa Chien, who co-authored the relevant guidelines. High-level slot players can easily accumulate W2-G forms totaling millions each year, yet many may still end up with a net loss annually. Once gross income surpasses a million, players will incur a 5.4% tax on any winnings of $1,200 or more, even if their overall financial outcome is negative for the year. Personally, I find this unjust. If we must tax gambling winnings, similar to the approach taken in Canada, it should be based on net gains rather than total gross winnings each year. If this becomes law, it could severely hinder high-stakes slot gaming in this country. Tax Help for Gamblers This year, I made a resolution to diligently document my gambling excursions. Notably, tracking the bankroll I start with and the final outcome is essential. Since I mainly play craps, I don't need to keep tabs on various games. My log needs to be detailed enough to support any claims for losses that I might use to counter the substantial winnings my wife is bound to achieve this year.

You can find Marissa on Twitter under the handle @taxpro4gamblers, where she sometimes responds to followers' inquiries about tax-related issues.

According to page 12 of IRS publication 529 The date along with the type of wager or gambling activity.

• The name and location of the gambling venue.
• The names of individuals present during the gambling event.
• Moreover, keeping supplementary documentation like W2-G forms and losing tickets is crucial. Personally, I utilize Excel for my log, ensuring I retain W2-G forms and losing sports tickets. The book Tax Help for Gamblers by Jean Scott & Marissa Chien dedicates an entire chapter to this subject.
• Amount won or lost.

This topic was brought up in the forum of my partner site

You cautioned that to help fund the healthcare initiative, any gambling winnings reported on W2-G forms exceeding $1,000,000 would incur a 5.4% tax before the deduction of gambling losses. This could greatly affect high-end slot players who accumulate numerous W2-G forms. What is the latest status on this issue? Wizard of Vegas .

You can find Marissa on Twitter under the handle @taxpro4gamblers, where she sometimes responds to followers' inquiries about tax-related issues.

This question is indeed complex and carries much debate. Allow me to advise caution, as tax law is not my area of expertise; you should consult with a tax professional regarding your individual circumstances. A more knowledgeable source than myself on this issue would be

You cautioned that to help fund the healthcare initiative, any gambling winnings reported on W2-G forms exceeding $1,000,000 would incur a 5.4% tax before the deduction of gambling losses. This could greatly affect high-end slot players who accumulate numerous W2-G forms. What is the latest status on this issue? Wizard of Vegas .

by Jean Scott & Marissa Chien. Chapter three discusses this subject extensively. Tax Help for Gamblers Typically, the guideline is that income is taxable, while gifts are not. Therefore, a complimentary service without obligation would not be subject to tax. Any rewards you receive based on point accumulation, winning a competition, or any other earned means would be taxable. However, there may be exceptions, and some situations could fall into a gray area. If you're uncertain, it's advisable to consult a tax expert.

I wasn’t aware of this until I started receiving W2-Gs from casinos, but are there any alternatives to receive payouts without providing a Social Security number? I'm a bit uneasy about casinos having access to excess information. After hitting a few royal flushes and hand pays, I became uncomfortable with the casino retaining my ID while prompting me to provide my Social.

You cautioned that to help fund the healthcare initiative, any gambling winnings reported on W2-G forms exceeding $1,000,000 would incur a 5.4% tax before the deduction of gambling losses. This could greatly affect high-end slot players who accumulate numerous W2-G forms. What is the latest status on this issue? Wizard of Vegas .

As of 2011, such countries included Armenia, Australia, Austria, Azerbaijan, Bangladesh, Barbados, Belarus, Belgium, Bulgaria, Canada, China, Cyprus, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Mexico, Moldova, Morocco, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russia, Slovakia, Slovenia, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, Czech Republic, Netherlands, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, United Kingdom, Uzbekistan, and Venezuela.

I've been attempting to decipher the exact regulations, but it's proving to be quite overwhelming. Please consult the IRS

I want to extend my gratitude to Marissa Chien, co-author of rules for issuing a W2G form for more information.

, and MathExtremist for their assistance in addressing this inquiry. Tax Help for Gamblers This question is currently being discussed on my forum at

You can find mathematically sound strategies and information regarding casino games like blackjack, craps, roulette, and many others. Wizard of Vegas .