How Tax on Casino Winnings Work

You may think that the government taxes your casino winnings as soon as you collect them, but this isn’t true at all—not according to the Internal Revenue Service, and not according to the state you are in. Taxing your winnings depends on whether you are considered a professional gambler or an amateur gambler; it depends on where you live, and it depends on what kind of gambling you do. If you can keep these things straight, then the federal tax on casino winnings will be simple to understand.

Will I Have to Pay Taxes on Casino Winnings?

Taxes on gambling winnings vary from state to state. For example, if you live in California, your gambling winnings are considered taxable income. If you live in a state with no income tax, however—and many people do—you don’t have to worry about paying taxes on casino winnings at all. Even still, knowing how to report these winnings is important for two reasons: it helps keep Uncle Sam out of your pockets and it gives you an accurate picture of your earnings that can help you optimize your tax returns in future years.

Taxes on Casino Winnings in the USA

If you think playing in a casino is always a winning endeavour, think again. If you earn winnings at a USA casino, expect to pay taxes, as casinos are required to report your winnings and submit payments for federal income tax. But it’s possible to avoid paying additional taxes on your casino winnings by taking advantage of certain legal methods that can be used—and we’ll discuss those here.

Here are two important things to know about how gambling taxes work in America.

There Are Different Rates for Different Gambling WinningsThe IRS Expects Casinos to Report Your Winnings

Do I Have to Report All Casino Winnings?

While it’s not all that common, there is a federal tax you have to pay when you win at a casino or slots parlour. It applies to both traditional slot machines and electronic versions, as well as most table games. The only exception is bingo winnings – those are 100% tax-free. If you’re not sure if you have to report your casino wins (or how much), here’s what you need to know about reporting gambling income on your taxes.

How do I file my taxes for gambling: As of 2019, everyone must file their taxes electronically using one of two methods: e-file or free file with IRS Free File. If you prefer to use paper forms rather than online filing, be aware that you can only submit one form in each category per year—that means either Form 1040EZ or Form 1040A, but not both.

Taxes on Casino Winnings in the UK

If you win money at a casino or other gambling establishment in England, Wales or Northern Ireland, you don’t have to pay any taxes on it. However, if you win more than £5,000 (about $6,800), you must tell your local tax authority that you won. And if you win more than €750 (about $1,000), your casino will automatically tell them for you. However, there are also some interesting loopholes to take advantage of! For example, if you live outside of Great Britain and win less than £2,500 ($3,500) while playing with a British passport or driving license then you can keep your winnings without paying taxes.

Also, note that casinos are required by law to report all jackpots over £500 ($700). This is done through an independent company called CHIMP, which collects and distributes these funds.

In addition, casinos may withhold up to 25% of jackpots over £1 million ($1.4 million) until they get proof from players that they aren’t residents of Great Britain who earned their income from gambling within the country and therefore shouldn’t be taxed.

Taxes on Casino Winnings in Canada

Do you need to pay taxes when you win at casinos? Well, not exactly. For starters, Canadian casinos don’t report jackpots to Canada Revenue Agency (CRA). If you play at a casino in Canada, your wins aren’t reported for tax purposes. This is no different than if you won big playing slot machines or went home with a pile of chips from your favourite poker game – winnings and losses from gambling are never reported by licensed casinos in Canada. However, if CRA officials discover that you have been hiding taxable income, they can levy fines up to 200% of your total earnings! So it’s always best to keep good records and declare all your casino earnings and profits.

Tax on Casino Winnings

Are My Casino Losses Deductible?

The federal government takes a big cut of every casino winner’s earnings in taxes. But, there are two ways to deduct your losses and save money at tax time. One is by converting your winnings into gambling credits and then using those credits to offset future gambling wins or losses (some casinos allow you to do so). The other is if you have substantial losses – at least $1,000 – that exceed your winnings, in which case you can claim them as a deduction up to an amount equal to your total winnings for that year. Some states also allow deductions against state income taxes for certain amounts of casino losses, although they aren’t universal rules.

Check with your state revenue office for more information. While it’s true that many taxpayers claim expenses that are related to gambling, you’re not entitled to deduct your losses. To take a deduction for your gambling losses, you have to itemize—but since you’re only allowed one standard deduction, that means all of your other deductions would be wasted because they wouldn’t exceed 2% of your adjusted gross income (AGI). Unfortunately, gambling winnings are treated no differently than any other type of earnings. And what about casino comps? Do they count as income? The short answer is yes—you do have to report them as income.

Taxes on Casino Winnings in Australia

If you’re an Australian resident who has won any kind of casino jackpot in Australia, you may not be aware that you have to pay tax on your winnings. This applies even if you live outside of Australia when you first buy into a game and even if you play online using foreign currency. Paying taxes might seem like something that’s only relevant to high rollers or big winners but there is a simple reason why Aussie casinos ask their players to sign documents confirming they are Australian residents and whether they are liable for tax here or not. Whether or not you pay any taxes depends largely on how much money is at stake, so it could happen that smaller wins might also be taxed.

Taxes on Casino Winnings in New Zealand

The New Zealand government taxes gambling winnings as if they were employment income, and therefore subject to National Superannuation, student loan repayments and PAYE deductions. The taxable amount of your winnings are calculated based on a rate that takes into account how much you won in relation to your stake, which is set at 30%. There is also a 25% tax deducted at source by NZ casinos.

If you’re a nonresident, then any profits made from gambling are taxed at 33%. If you’re not a citizen or resident of New Zealand but have NZ$60,000 or more in worldwide income (including winnings), then there are special rules for paying taxes on casino winnings. Your first $20,000 worth of profits will be taxed at 33% while anything above that will be taxed at 28%.

Is There A Difference Between State and Federal Laws Regarding Casino Winnings?

While all states recognize gambling winnings as taxable income, they do not necessarily tax them at the same rate. Taxes on casino winnings vary from state to state. This is why some players travel out of state to play in casinos that offer big jackpots; it’s much easier to pay taxes where your income is based than it is to move your residence just so you can keep more of your money. The taxes on gambling winnings are calculated using a progressive system, meaning that those who earn more are taxed at a higher rate.

For example, in Colorado, you will pay 25% for any amount over $600 won playing poker or blackjack. If you happen to be one of those lucky people who hit it big and win over $5,000 then you will be paying 28% federal taxes plus an additional 10% for Colorado state taxes for a total of 38%. So while there are no laws against taking your wins with you when you leave, consider how much better off financially it would be if instead of leaving with your cash prizes, you stayed and played a little longer!

Final Thoughts

Since gambling is legal in some parts of America and not in others, there are some laws regarding where money won through gambling can be taxed. Specifically, if you live in a state that doesn’t allow gambling, or if you go to Las Vegas on vacation and win at a casino there, that money may be tax-free. The IRS allows states to exempt people who pay taxes within their state from having to pay federal taxes as well. If you live in a non-gambling state, even if your income is derived from gambling activities elsewhere in America, it is exempt from taxation. However, if your income comes entirely from gambling – even if you don’t gamble within your home state – then it will still be subject to taxation.

Author: Vicki Brown