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.
- Factoid: Twenty-five years ago 2 states had legalized gambling and 48 did not. Now 48 do and only 2 do not (Hawaii and Utah.)
- Factoid: Nevada gambling revenue was $1 billion in 1975 ...$10 billion in 2004 and is projected to be $15 billion in 2009.
'Las Vegas was built for people who are really bad at math....' ...Penn Jillette (Penn & Teller, now at the Rio!)
'There are two times in a man's life when he should not speculate: when he can't afford it and when he can.' ...Samuel Clemens, also known as 'Mark Twain' (1835-1910)
In the last decade, entertainment, shopping and fine dining have replaced gambling as the top attraction for visitors to Las Vegas. Many hotels get more than half of their revenue from non-gambling sources.
Although tourists no longer list gambling as the primary reason for their visit, almost all are willing to risk an average of $500 each trying to hit that elusive jackpot.
Nationwide, casino gambling is a $50 billion business. And 20 percent of that amount comes from just one state ...Nevada. One third of all Nevada general tax revenue comes from state gambling taxes.
The state of Nevada and casinos like to call it “gaming” since ”gambling” has such an negative ring to it. We agree. “Gaming” is a better word for the games of chance legally offered in Las Vegas. Games are played for entertainment. And this is how you should treat the money you risk in Las Vegas in hopes of hitting “The Big One.” Play for fun and the “possibility” that you might win. NEVER take Las Vegas gambling seriously.
Gambling laws in NevadaLas Vegas gambling was legalized in 1931. The Nevada Gaming Commission and Control Board develops and administers all gaming regulations. Their website can make interesting reading. Casinos with more than 15 slot machines pay an annual tax of $250 on each one. There is also an additional monthly tax of up to 6.75% on gross gaming revenue ...a percentage that is the lowest in the U.S.
Anyone working as a gaming employee must be registered with the state and have a valid gaming work permit. This includes all casino workers except bartenders and cocktail waitresses.
You must be 21 to enter a casino, gamble ...or purchase or consume alcoholic beverages. If you look young carry a state-issued ID with photograph such as a driver’s license. Children are permitted in the casino public walkways but are not allowed to be near slot machines or gaming tables. You are allowed to carry open alcoholic beverage containers on the street, but not in a vehicle.
Taxes on gambling winningsThere are some things you should know if you are lucky enough to win. The Internal Revenue Service (IRS) requires all casinos in certain instances to withhold federal taxes if you win over a certain amount. The percentage withheld ranges between 25 and 30 percent depending on how you won. Here is how it works.
If you had gambling winnings, the casino is required by the IRS Information Reporting rules to withhold 28% as income tax if you do not provide a documented TIN (Taxpayer Identification Number, that is, your Social Security Number.) We have heard of cases where it is withheld no matter what. The withholding tax is 30% if a foreign gambler. The tax rate is 25 percent if the amount is over $5,000 (except for non-resident aliens.)
When your winnings exceed a specified threshold and/or tax is withheld, the casino will give you an IRS Form W-2G showing the amount you won and the amount of tax withheld. Report (and take credit for the tax you paid) on your IRS Form 1040 tax return at the end of the year. (Only use Form 1040 if you had gambling winnings; you cannot use any other form.)
Generally, gambling winnings are reportable to the IRS if the amount paid is (a) $600 or more and (b) at least 300 times the amount of the wager. This requirement primarily applies to lotteries, sweepstakes and other big winnings from small bets. It does not apply to winnings from bingo, keno, and slot machines.
Casinos report gambling winnings for these games to the IRS when a player wins $1,200 or more from a bingo game or slot machine or if the proceeds are $1,500 or more from a keno game. When you exceed these amounts, the casino may withhold taxes and will provide you with IRS Form W-2G. They keep the original and give you two copies of the form. (If state income tax withholding is required on gambling winnings in your state, additional taxes may be withheld.)
The rules are different for table games (such as blackjack, baccarat, craps, roulette or other spinning wheel games.) Since Nevada casinos do not know the amount you started with, they are not able to determine how much you won (...your taxable gain.) As a result, federal law provides that there is no withholding or even reporting of table game wins to the IRS. It therefore follows that table game winners probably do not report their gambling profits to the IRS.
You not only pay taxes on gambling profits, but you can also claim gambling losses as an itemized deduction as well. But you must keep some kind of documentation (such as a diary or tickets) to substantiate the amount and nature of the losses. In any event, you cannot claim gambling losses that exceed your winnings.
Managing your moneyGreed is the downfall of most players. The odds that you will win if you play long enough is statistically wrong ...as is; having doubled your money, you next try to quadruple the winnings (and end up losing it all.) Both concepts have built a lot of nice hotel-casinos in Las Vegas.
My system for managing gambling money is simple. I budget $100 a day which, according to statistics, is about average for Las Vegas visitors. If I am on a five day vacation, I put $100 in each of five dated envelopes ...a total of $500. I ration the money throughout the day and stop when I lose my hundred and do other things. I might stop when I double my allotment. In any event at the end of the day, I either am ahead or behind. If I am ahead, I put whatever portion of the $100 I have left (hopefully it is more than $100) back in the same dated envelope and place it in the room safe that hotels provide. Tomorrow I play with the money in following day’s envelope. The most you can lose is $100 on any given day ...or $500 for your trip. I am happy if I break even ...and you should be too. Once in a while I go home with “their” money. In recent years I have done better. I will tell you how later.
The bad news: There are no casino games or bets where the house does not have a clear advantage. The odds either favor the house ...or they get a commission. And if you are not familiar with basic information about the games you play or bets you make, you are just about a guaranteed loser. In short, casino owners are in business to make a profit. They did not build all those gorgeous hotels by giving away money.
The good news: The reality is that if you are lucky you can win ...and the drinks are free. But statistically the chances are against winning. So the cardinal rule is, over the long haul, whether playing the slots, table games, betting on sports or risking money on anything; you will probably lose. But some bets are better than others.
It is beyond the scope of this website to provide in depth strategy on how to gamble and win in Las Vegas. Many books have been written on the subject and - trust me - none work over the long haul ...or are illegal.We will, however, cover the most popular games and things you should know as a beginner to have fun and minimize your loss ...and maybe make a few bucks.
Let the games beginBlackjack (21) is either dealt by hand with one or two decks. Multiple Deck 21 is dealt from a box called “the shoe.” Everyone in Blackjack plays against the dealer. Roulette consists of a spinning wheel marked with numbers 1 through 36 (18 red, 18 black) and American Roulette has a green 0 and 00 ..a total of 38 possibilities. You win if your number, combination of numbers or color comes up. To play Keno, you select a minimum of 4 but no more than 10 numbers on a ticket between 1 and 80. Twenty of the 80 numbered balls are drawn and you win if all your selected numbers are chosen. Craps is a complicated dice game which we do not recommend for first-timers. There are many other table games (and variations) as well. More and more people are playing poker these days and we will also have a little to say about that later.
By far, however, the most prevalent pastime in Las Vegas is playing the slot machines ...and video poker. We will cover the games of chance and sports betting in this chapter ...which you should play, where you should play and the odds of winning.
NEXT PAGE: 10.2 SLOT MACHINES ...AND VIDEO POKER... ⇨
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Yes, they are taxable. You are on the honor system to report the income. The casinos will not report any winnings to the IRS. It isn’t just on-line casinos, ANY net gambling winnings are taxable, regardless of where or how they were won.
Whether to cash out it all out at once is your decision. Assuming you are a U.S. citizen you are obligated to declare the income on your next tax return. If you don’t you could be charged with tax evasion. However this sort of thing is largely on the honor system. You are also allowed to deduct any gambling losses in the same year against your winnings.
Zero. You can not deduct a net loss at all. However if you have some W2G forms (generally given on wins of $1200 or more in slots, video poker, and keno) then you can deduct other losses against these wins. You should keep documentation for any losses you claim. You may be thinking of deducting losses on stocks. There you can deduct up to $3000 a year, and can carry over amounts larger than that to the next year. I’m still carrying over losses from the tech crash in 2000.
W2G forms are definitely something to think about when playing video poker at the larger bet amounts. Although you are obligated to pay taxes on your net win at the end of the year regardless of how many W2G forms you have, a payout of $1200 or more will necessitate a wait and obligate you to tip the person paying you. In less classy casinos a hand pay will also cause the tip vultures to start hovering around you. To avoid all of this sometimes the player should consider deviating from optimal strategy. For example with AAA88 in 10/7 double bonus the odds marginally favor keeping the aces only. However in a $2 to $10 game hitting four aces will pay over $1200, necessitating a W2G form, while a full house will stay under the limit. Considering the tax implications keeping the full house is the better play.
Taxes On Winnings Calculator
To answer your question I’ll assume a four of a kind pays 25 times the bet. Then a four of kind on the deal in a $0.20 50-play game will pay $0.20 * 5 * 50 * 25 = $1250. You will get a four of a kind on the deal once every 4165 hands, on average. If you were to drop the number of hands to 47 the win for a four of a kind on the deal would be 47 * $0.20 * 5 * 25 = $1175, staying under the W2G threshold.
I believe the policy at most casinos is that for large transactions you can have the funds any way you want. Before you consider laundering money by turning cash into checks be aware that casinos ask for a Social Security number and make a record of any transaction involving $10,000 or more.
You are subject to tax for any gambling winnings. However table games players are basically on the honor system. An exception that a W2G form is generated if a win is 300 for 1 or more odds and is over $600. That is usually only an issue with progressive jackpots. Also, if there is a cash transaction of $10,000 or over the casino is obligated to fill out a CTR, which stands for Cash Transaction Report. Yet these are nothing to worry about, and I think many big bettors are overly paranoid about them.
Only single wins of $1,200 or over are subject to withholding. If you won over $1,200 in small wins you would not be subject. When you press the cash out button the machine doesn’t know your citizenship and will just print a voucher for whatever you had. Any $1,200 or over win will always lock up the machine until an employee unlocks it. On high denomination games, usually starting at $10 or $25, the casino may keep a log of all your taxable wins. On a $500 machine, I’m sure they would have somebody standing right next to the machine do the paperwork. When you are done they will give you a single W2G form for the sum, and in your case subtract the withholding from that.
Paying Taxes On Gambling Winning
The W2-G is based on the gross win, not the net win. So, yes, if the player got a $5000 push on a Red, White, & Blue, he would get a W2-G.
Cliff from Aiea
In the U.S., any gambling winnings of any kind and any amount are taxable. However, with table games, it is on the honor system to report.
I forwarded this one to Brian, who is a former gaming regulator, and currently a casino manager. Here is what he said,
The casino would not know that someone was in the country illegally. If he had a valid passport, the jackpot would be honored. The illegal may not know this, be scared or they may not have a valid ID to show. Whenever someone wins $1,200 or more, ID is required for tax purposes. If someone doesn’t have his ID, the jackpot would be held in the cage waiting for them to claim it. In most cases, the person has legitimately forgotten their ID; however, sometimes you run into a problem, such as a minor who was gaming. If he doesn’t claim it, the money has to be added back into revenue because the deduction (jackpot) was never paid or there are abandoned property rules that prevail. Also, like the U.S., most countries tax worldwide income. To that end, the U.S. has tax treaties with several countries to withhold or notify the respective governments of monies won in the U.S. so Uncle Sam always gets his cut.
This is getting out of my area, but I'll try to help. The IRS web site says that for this purpose, the U.S. has tax treaties with the following countries: 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. Note that New Zealand is not on the list.
If you are a resident of one of the listed countries, and you hit a jackpot of $1,200 or more, then you should ask to fill out a form W8BEN. That should reduce, or in most cases, eliminate the withholding.
Even if you are not from one of the listed countries, or don’t fill out the form, you can still get the withholding back by filling out form 1040NR, or the simplified version the 1040NR-EZ.
My own tax accountant is Marissa Chien EA, author of Tax Help for Gamblers. She does an outstanding job, but some might consider her expensive. For a 1040NR she says she charges about $1,000. She adds this form is usually incorrectly filled out by most others. Her e-mail is .
IRS PDF’s:
- 1040NR-EZ instructions (PDF)
- 1040NR-EZ form (PDF)
- 1040NR instructions (PDF)
- 1040NR form (PDF)
- W8BEN instructions (PDF)
- W8BEN form (PDF)
Marissa is on Twitter at @taxpro4gamblers, where she occasionally answers tax questions to followers.
Title 31 is a regulation stating that the casino should make a record of cash transactions of over $10,000 by a single player in a single day. In such cases, a CTR must be filled out, which stands for Cash Transaction Report. This includes making multiple transactions, adding up to over $10,000. If you cash chips close to, but under, $10,000, the cage will likely want to make a note of it, in case you come back later that day, and go over the $10,000 daily limit.
My advice is to give them what they ask for. You have a lot more to fear by looking like you are avoiding CTRs than the CTRs themselves. In fact, I think there is nothing to fear from a legitimate CTR; the casinos generate lots of them. Personally, I have generated hundreds, to no known detriment. However, it raises lots of attention when you look like you are going out of your way to avoid them. I know one person who was rebuffed when he tried to cash in chips, because he had too many previous redemptions of just under $10,000. So, that is my two cents. Better suited to answer this is 'Brian,' a current Las Vegas casino manager, and former regulator, whom I like to turn to for procedural questions like this.
Gambling Taxes Winnings
In a nutshell, Title 31 is the U.S. Department of Treasury Code designed to prevent money laundering. It requires that certain large cash transactions be reported to the Government. These are filed on FinCEN Form 103 “Currency Transaction Reports by Casinos” (FinCEN is the Financial Crimes Enforcement Network). Casinos are required to report all currency transactions in excess of $10K in a single day. The “day” doesn't follow the clock − a casino picks their day (e.g., 3 a.m. to 2:59 a.m.).
All Financial Institutions comply with Title 31. Casinos are considered financial institutions because of the types of transactions they perform, which are similar to those of a bank (e.g., check cashing, wires, loans, cash exchanges). Unlike traditional financial institutions, casinos conduct a great deal of transactions with unknown patrons. When you set up your checking account at the bank, you give them all of the necessary information needed to fill out CTRs. However, when cashing chips at the cage, the only way the casino can get this information is to ask. Casinos have to get all of the necessary information to fill out a CTR before the patron crosses the $10,000 threshold. Since the fines for non-compliance are hefty, they make a diligent effort to comply.
Casinos are apprehensive to give patrons too much information on Title 31 for fear of inadvertently breaking the law. Casinos are specifically precluded from aiding patrons in structuring transactions in such a manner as to allow them to skirt the requirements. When you ask questions, they prefer to point to a preprinted informational card and don’t like to discuss the matter for fear of divulging inappropriate information.
Circumventing Title 31 is relatively easy for undocumented transactions (e.g., chip buys, chip redemptions, etc.), but why would you want to? If the casino has reason to believe that you are purposefully conducting your transactions in an effort to avoid the reporting requirements of Title 31, they'll fill out a Suspicious Activity Report by Casinos form (aka SARC). If a casino learns that you exceeded the $10K threshold and they didn't get the required information, they will bar you from gaming until they get it. — Brian
Here is what the bill says:
In the case of a taxpayer other than a corporation, there is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal to 5.4 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $1,000,000. -- Section 59C(a) page 337 H.R. 3962 (PDF — 3270 KB) or CNN.comThe surcharge would be applied before the gambler could deduct any offsetting losses. I verified this with Marissa Chien, co-author of Tax Help for Gamblers. For high-level slot players, it is not difficult to rack up W2-G forms in the millions per year. Most of these players will still have a net loss on an annual basis. Past the million point in gross income, the player will pay a 5.4% tax on any win of $1,200 or more, even if there is a net loss for the year. This is just my opinion, but I think that isn’t fair. If we must tax gambling winnings (which they don’t in Canada), it should be on the net, not the gross winnings, on an annual basis. Should this become law, it will ruin high-level slot play in this country.
Marissa is on Twitter at @taxpro4gamblers, where she occasionally answers tax questions to followers.
According to page 12 of IRS publication 529 (PDF), the minimum a gambling log should include is:
- Date and type of wager or wagering activity.
- The name and address or location of the gambling establishment.
- Names of other persons present during the gambling activity.
- Amount won or lost.
In addition, you should keep other documentation, such as W2-G forms and losing tickets. Personally, I keep my log in Excel and always retain W2-G forms and losing sports tickets. The book Tax Help for Gamblers by Jean Scott & Marissa Chien has a whole chapter on this topic.
This question was raised and discussed in the forum of my companion site Wizard of Vegas.
Marissa is on Twitter at @taxpro4gamblers, where she occasionally answers tax questions to followers.
I’m told that said provision (section 59C) was dropped from the final bill. That is the good news. The bad news is there is a new Medicare tax on unearned income above $250,000 for a married couple, starting in 2013. It looks like this may apply to gambling winnings before itemizing any gambling losses. Please ask me about this again in about two years for a status report.
This question was raised and discussed in the forum of my companion site Wizard of Vegas.
gambler
That is quite the difficult and controversial question. Before I answer, let me say that tax law is not my area of expertise, so you should consult a tax professional about your personal situation. Another better source than me about this is Tax Help for Gamblers by Jean Scott & Marissa Chien. Chapter three deals with this topic.
The general rule of thumb is that earnings are taxable and gifts are not. So a no-obligation comp would not be taxable. Anything that was given to you based on points, a drawing, a tournament, or earned some other way would be taxable. Granted this is not going to cover every situation, and some situations can be in a gray area. If you’re in doubt, consult a tax professional.
This question was raised and discussed in the forum of my companion site Wizard of Vegas.
First, you'll have to produce photo identification, or the casino will hold onto the money until you do. If you show identification but decline to produce or declare a valid social security or other tax identification number, then 25% to 30% will be withheld depending on whether the jackpot is more or less than $5,000, and whether you are from the United States or a foreign country with a reciprocal tax treaty.
As of 2011, such countries were 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, Russia, Slovakia, Slovenia, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Tajikistan, Thailand, The Czech Republic, The Netherlands, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, United Kingdom, Uzbekistan and Venezuela.
I've been trying to figure out the rules exactly, but it is giving me a headache. Please refer to IRS rules for issuing a W2G form for more information.
My thanks to Marissa Chien, co-author of Tax Help for Gamblers , and MathExtremist for their help with this question.
This question is discussed in my forum at Wizard of Vegas.