A broad overview of gambling taxes in the US
Unlike the UK and various other countries, any winnings that you collect while gambling in the United States are subject to tax. And it isn’t just your local taxes either. It may be taxed at a federal level and then again at a state level.
So even if you hit the big time while on the strip, you need to remember that a chunk of that cash isn’t coming home with you!
Key takeaways:
- 24% of winnings over a certain amount are kept by the IRS.
- It is your responsibility to correctly declare any winnings on your end-of-year tax return.
- Different types of gambling will incur different taxes at a federal and state level.
- There are only 9 states that do not impose a local income tax on residents.
And while nobody loves paying taxes, there is 1 small piece of good news. And that is that you can deduct any losses from your winnings when you declare them.
The 24% federal tax is deducted by the payer. They will complete a W-G2 form and give you a copy. This happens when you win over $1,200 on slot machines or bingo and over $1,500 on keno. There is slightly better treatment if you are playing sweepstakes and lotteries. For these, you can win up to $5,000 before any tax is deducted. Horse racing winnings are declared over $600 or 300 times your initial wager.
Exceptions
The IRS does not withhold taxes while you’re playing blackjack, craps or roulette. The US government considers these to be games of skill rather than chance and will rely on player honesty. After all, it is very difficult for them to determine how much money you started with while playing at a table.
When it comes to declaring your winnings, you will complete the ‘other income’ section on form 1040. Depending on your other finances, the 24% already applied may mean that you receive some of the cash back or you could possibly owe more. Everyone’s circumstances are different.
Local gambling taxes by state are specific to that area and will be added as part of your income for that year. We will take an in-depth look at these figures for each individual state in just a moment.
Professional gamblers
If you are considered to be a professional that earns a regular income while gambling, then you will report these on your regular tax forms. Self-employed people mark down the income and expenses on Schedule C.
Non-resident winnings
In general, non-residents will have 30% of their winnings deducted at the source. But there are tax treaties between some countries such as the UK, for example, where winnings are not taxed. If any amount is withheld, then you can use Form 1040NR to claim it back. Canadians can also enjoy some tax added tax benefits thanks to another special agreement in place.
Our top 3 bookmakers in the US
Current state-by-state gambling taxes in the USA
Let’s take a look at all of the state tax details where you live so you know exactly what to expect when a win comes your way both on and offline.
The Cotton State imposes a tax of 2% on any winnings over $500. But as the winnings increase, so too do the taxes. The maximum that is levied on any winning is 5%.
The Last Frontier is more than generous when it comes to taxing winnings from casinos and other forms of betting. While you still have to pay the 24% at a federal level, there isn’t an Alaska state tax on gambling winnings.
Arizona is another state that has a sliding scale of local taxes depending on how much you win. The minimum is 2.59% and this is for any winnings up to $26,500. Over that amount, the taxes go up gradually to a maximum of 4.5%.
The Natural State is happy to allow you to enjoy a bit of good fortune. Anything under $1,200 is exempt from tax at a state level but federal rates still apply. Over that amount, there is a standard 3% tax on all winnings regardless of how high they go.
Winning a ton of cash coming from The Golden State can be a little eye-watering. It’s no joke here! Gambling wins are classed as income and this is taxed according to the state levels. Currently, the lowest California state tax on gambling winnings is 1% but it can reach all the way up to 13.3% for the highest earners. The 10% excise rate may also come into play.
Most winnings in Colorado are subject to a flat rate of 4.63% regardless of the amount involved. However, it does depend on the type of gambling you enjoy. Anything you receive from a US sportsbook will be taxed at 10%.
The Nutmeg State doesn’t hold back when it comes to taxing its local gamblers. There’s a 6.99% tax on anything over $600.
Delaware shares a hefty tax pact with Rhode Island and distributes proceeds among the 2 states. Taxes here are set at 51%.
If you win over $5000 throughout the year, then you’ll have tax levied at 24%. Sports betting is slightly different and comes under a separate state tax at 13.75%. Be sure to mark this clearly on your tax return to avoid higher taxes than necessary.
Anyone gambling in The Peach State will have 6% of their winnings removed by state taxes. It doesn’t matter if you live there or not, they want their cut.
Nobody in Hawaii is allowed to gamble throughout the state. So there aren’t any winnings to tax! However, some residents are classed as professional gamblers and presumably travel out of state to play. Taxes for these players are set at 4%.
The Gem State is a gambler’s best friend when it comes to local taxes. Apart from the standard federal tax, there is no Idaho state tax on gambling winnings.
Earning up to $600 in winnings throughout The Prairie State won’t cost you a dime in added taxes. But when you go over that, you start to face income tax which is a hefty 15%.
Landing a win for anyone from Indiana won’t attract too much by way of extra charges. There’s a flat rate of 3.23% for anything you win regardless of the amount.
The Corn State keeps things nice and simple when it comes to taxes on all types of gambling. It doesn’t matter what you win, the state gets a 5% cut.
It’s possible to land a win up to $5k in The Sunflower State without anyone other than the IRS getting hold of your cash. Once you go over that amount, you’ll see 5% taken from you on your year-end return.
Regardless of how you win any cash in Kentucky, there will always be a 6% tax applied. This goes for lottery wins too.
Raking in a win at a land-based casino in The Pelican State will attract a 10% tax. But if you score a win while exploring any of the legal online forms of gambling, then you’ll owe 15%.
The State Lottery is in charge of all gambling in The Pine Tree State and they’ll collar you for a cool 5% of anything you win regardless of the type of gambling.
The Free State doesn’t exactly live up to its name when it comes to gambling taxes. Anything over $600 gets hit for 8.75% if you’re a resident of this fine state. Non-residents get a little more leeway with a reduced tax of 7%.
Another state that has decided to go down the over/under $600 route is The Bay State. Massachusetts state tax on gambling winnings over this amount is taxed at 5%. But under that is free from any duty.
Anything that you are lucky enough to win in Michigan will be subject to a 4.25% tax at a state level. Federal level taxes also apply.
The North Star State takes it easy on gamblers when it comes to the end-of-year taxes. There is nothing extra applied on top of the federal 24%.
Winnings in The Magnolia State come out directly at the source. So while the IRS takes 24% at the casino, the state will also remove 3% on top.
You are entitled to win up to $601 in Missouri without the state charging you for the privilege. But anything over that amount is at 4%.
Winning on a slot machine in Big Sky Country will be subject to 15% tax. But landing a win at bingo or while playing keno only gets a 1% Montana state tax on gambling winnings.
Winnings in Nebraska don’t all end up in the player’s pocket. A massive 20% is levied on casino gambling here.
The Silver State is happy for you to win up to $5,000 without taxing it. But anything over $5k is stung with a nasty 25% tax bill.
Gambling isn’t as potentially profitable as you may hope in New Hampshire. Taxes stand at 51% for online betting and 50% in person.
Anything you win while online gambling in NJ suffers from a standard 3% tax for all amounts at a state level.
You’ll face a 9% tax in The Land of Enchantment when you win anything at the casino or while sports betting as well.
Gambling in the Empire State attracts different taxes depending on where you play. Land-based games get hit with 8.5% while the online NY state gambling tax rate is 13%.
Professionals and all other gamblers alike pay 4% tax on anything they win here in North Carolina.
You won’t find much other than charity casinos here in The Flickertail State. There’s a 1% tax for winnings while playing these games.
Any winnings from gambling here finds a 4% tax attached to it. It doesn’t matter what you play or where you play it.
The Sooner State will want to see a cut of your winnings too. They’ll take a 3% Oklahoma state tax on gambling winnings over $1k.
Anything under $600 is completely free of additional taxes in Oregon. There is a small tax applied up to $1.5k but after that, it’s 8%.
The Keystone State charges 3.07% on anything you win here from sports betting or casino games. Winnings above $5,000 may also increase the federal taxes too.
The Ocean State has a revenue pact in place with Delaware and 51% of all gambling winnings are taxed and shared out.
The Palmetto State residents pay taxes at between 0% and 7% on any winnings that are over $3,100.
No South Dakota state tax on gambling winnings is applied to winnings in The Mount Rushmore State.
Only the federal tax of 24% is charged here. There are no other local taxes to worry about on any type of gambling.
The Lone Star State wants 3% of anything that you win on top of your federal taxes. This is regardless of the games you play.
Gambling laws are super strict in Utah. As such, nobody should be winning anything, anywhere! So no taxes to mention.
The Green Mountain State levies a 6% Vermont state tax on gambling winnings above $600. So small winnings won’t incur anything. It may be possible to avoid this tax altogether using the correct TIN. Speak to an advisor for more details.
There’s a sliding scale of taxes here in Virginia. Up to $3k is subject to the lower 2% rate. But over that will see the tax move up to a maximum of 5.75%.
There are no state taxes added to winnings in The Evergreen State. But at a community level, there may be some charges to account for.
It doesn’t matter what you win in The Mountain State, you should expect to see a 5.5% tax applied to all forms of gambling.
Taxes in The Badger State start at 7.65% and will increase depending on how much you’re lucky enough to win.
If you like to have a flutter on a sporting event in Wyoming, then expect to see a 10% tax on all winnings. There are no casinos in the state so no taxes should be due in that respect.
Gambling taxes – a necessary evil!
As we’ve seen, Gambling taxes by state are varied and complicated in some cases. But the revenue from casino payouts in the USA goes back into the system at a state and national level to keep things running smoothly in other areas.
Most of us will have to pay federal tax regardless of what we win or where we win it. But if you’re playing online, then you’ll need to be in the same state where you have an account. So this rules out the option of choosing to get involved in an area with lower taxes.
Check out our latest list of top sites that are available in your area and don’t forget to see what you might owe the taxman if you’re lucky enough to win.
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Gambling taxes by state FAQ
💰 Do I have to pay tax on gambling winnings in the USA?
Gambling taxes vary by state. The only way to know for sure if you have to pay taxes is to check out an up-to-date guide to all of the taxes involved in the USA at both federal and state levels. We’ve got all the info you need right here as well as places where you can enjoy top gambling action in your area.
⚖ What state has the best gambling tax laws?
It can be difficult to find reliable info on this subject. You could spend the day searching the internet. But why not make it easier and come and take a look at our guide to the gambling tax rates by state? Everything you need is detailed state by state with a breakdown of current tax rates for various forms of gambling.
🖩 Is the California gambling tax rate high?
Understanding the gambling tax rate by state is incredibly important for every player. It’s one thing to know the standard federal taxes but individual state rules are completely different. Some states treat your winnings as income while others see them as one-off gains. And unless you know exactly what taxes your state imposes on winnings, you could end up owing money.
