Are Online Gambling Winnings Taxable?

Are Online Gambling Winnings Taxable? What to Tell the IRS.

By Sharona B | Oct 20, 2010

Tax, Law

High School

Lessons: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19

In This Lesson

Games and Winnings Wins Minus Losses Keep Records

To declare or not to declare, that is the question. Well the answer depends on three things:

The amount won
The type of gambling undertaken
The ratio of the players winnings to the wager.

1. Which Online Game and Amount Won?

The IRS are only interested in the reporting of winnings over:

$600 on state lotteries, horse or dog racing (if the winnings are at least 300 times the wager),
$1,200 on a slot machine or bingo game and
$1,500 on keno.

If any player wins these amounts or more at a land based or online casino then they need to report this as income to the IRS via a W2-G form. Casino, bingo hall and poker room operators are likely to provide a pre-completed W2-G form showing the amount won and any taxes paid upfront.

Winnings from table games such as blackjack, craps, pai gow, baccarat and roulette do not necessitate the completion of a W2-G form, regardless of the amount won.

2. Balance Out the Wins with the Losses

Players can reduce the amount of tax paid on winnings to the IRS by reporting their losses within their itemized deductions.

You are able to claim up to the total amount of winnings declared which could effectively wipe out any tax payable. However, there is one thing you need to check before declaring your losses. Tax payers can claim a standard deduction allowance so it is important to check if this amount is larger than their winnings plus any other deductions they can claim. If so then it is better to simply claim the standard deduction which would be more profitable than listing a lower amount of gambling losses.

3. Keep Good Records

In order to complete a tax return form accurately it is important for serious gamblers to keep records of all wagers, the types of gambling undertaken as well as total wins and losses. Keeping good records can protect you should the IRS investigate and query your tax return form.

Make sure that you are aware of the tax requirements of online gambling and are prepared to submit a W2-G form which is based on accurate record keeping.

It's no real surprise, when you win, so does the IRS!

High School