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Gambling Winnings Tax: Guide to Gambling Taxation

Hitting the jackpot in any gambling game is what the players have all been dreaming of. But did you know that gambling winnings tax does exist? Your casino winnings are susceptible to federal income taxes as well as state taxes. And the Internal Revenue Service will require you to report your income. But don’t be sad, you can at least claim a deduction for at least some of your losses.

Have you won the latest lottery draw?

Lucky you!

But don’t be too excited, alongside your winnings is the tax that comes with it. And you will still need to pay for it.

What is gambling winnings tax?

Paying taxes on gambling winnings is mandatory. Whether it is money or a prize, it is still considered as income. That is why you need to declare it in your income tax when you have won in lotteries, wagers, bets, or raffles. Your gambling income also includes but is not limited to sports betting. It also includes prizes, awards, and contests.

Technically, all your cash winnings and fair market value prizes are liable to tax. Non-cash winnings like houses and lots, cars, and gadgets are taxable income as well.

Usually, the IRS taxes those gambling winnings at a flat rate of 25%. You cannot avoid paying those taxes. Simply because online casino Singapore, sportsbooks, and racetracks are regulated by the IRS. So, they are obliged and required to report your winnings.

Moreover, the rules of claiming your gambling income are different. It depends on whether you are a professional gambler. Or, you are just gambling for entertainment.

What is gambling loss deduction?

Of course, you cannot win in gambling without an investment. And winning without losses is very, very rare to happen. So, if you have gambling losses, you can deduct them during the filing of income tax returns (ITR). You can do it when itemizing your deductions. Yet, these deductible gambling losses should not be greater than the gambling income that you are reporting. And if you are going to file for a gambling loss, you need to get a statement from the institution with whom the losses were incurred.

gambling winnings tax
What is gambling loss deduction?

How to claim gambling income?

There are two ways in reporting gaming winnings. You can file it as “other income” (for gambling as a hobby). Or, as “self-employment income” (for professional gamblers).

How to deduct gambling expenses?

You can deduct your expenses on bets and lottery tickets. As well as wagers, and other gaming losses when paying taxes on gambling winnings. You can declare it in the “Other Itemized Deduction” section of your ITR. Moreover, you should not forget to note in the provided space that these are your wagering losses.

There are laws that state what miscellaneous itemized deduction can be withdrawn. Wherein, you can only deduct a part that exceeds a certain percentage. For some, it is 2% of your adjusted gross income (AGI). But this rule does not apply to gambling losses.

NOTE: Your gambling losses must be equal to or less than your reported gambling winnings as your income.

Unluckily, you cannot deduct your gambling losses and expenses from your winnings. And, you can only report the difference as your income from gambling. More so, you can no longer deduct other expenses. This includes the cost of traveling, food expenses, and others.

How do taxes work with online gambling?

Online winnings are still and fully taxable. So, you still have to report your online gambling winnings. And you still need to declare those winning that do not have withholding tax.

Of course, you might be able to deduct your gambling losses as well. So, if you are gambling online in a casino or sportsbook, you need to keep a record. Hence, you can accurately report all your gambling winnings and deducts gambling losses.

When deducting gambling loss, you must have to provide records. You need documentation that shows the number of your winnings and losses. This includes:

  • Receipts
  • Tickets
  • Statements

In the UK, online gambling winning is not taxable. In this country, you don’t have to pay taxes where you won £100 or £1 million. And this applies to any type of Singapore online casino games or horse racing.

What about my winnings online?

Still, it depends on the gambling sites that you are using. There is a gambling winnings tax where you will need to pay in one lump sum. Or, as a certain amount per month or year. So, you need to check the sites’ TOC so that you are certain how you will claim your winnings.

Who will pay the tax on my online gambling winnings?

Online and live casino in Singapore and bookmakers are the ones who pay tax. And this varies on their gambling duties and taxes.

  • General betting duty
  • Bingo duty
  • Machine games duty
  • Lottery duty
  • Gaming duty
  • Remote betting duty
Who will pay the tax on my online gambling winnings?

Do casinos withhold taxes on winnings?

Casinos report gambling earnings to the IRS but there are certain thresholds on this. These thresholds for gambling winnings vary depending on the type of casino games. For slot machines and bingo, you are paying taxes on winnings above $1,200. As well as, in other games such as keno, lottery, or horse racing. And in poker tournaments, you are paying taxes on winnings above $5,000.34

Even so, casinos are not required to withhold taxes on players who win large sums at certain games. This includes table games like craps, roulette, and blackjack. Although casinos do not withhold your winnings, you are still not excepted. And you still need to fill your obligation. You still need to declare and pay your taxes on gambling winnings.

Furthermore, online casino Singapore are not required to take out withholding tax on winnings that are under $5,000. As long as you provide your Social Security Number. Yet, if you do not give your SSN, then the casinos will have to withhold 28% on jackpots less than $5,000.

Likewise, you can request the casino to take out a specific amount of withholding tax on your winnings. Other players do this to avoid paying big taxes when they file their ITR. Moreso, extra withholding taxes may not be necessary if you keep a record of your winnings and losses. The IRS allows gambling loss deduction if you have documentation of your losses.

How to pay gambling winnings tax?

Taxes on Sweepstakes and Prize Money Winnings

Generally, gambling winnings tax on sweepstakes and prize money should be reported as “Other Income”.

Taxable Winnings on Raffles, Charity Drawings, Lottery,  and Sweepstakes by Wager

The taxes that you need to pay on these winnings should be declared as (Reportable Winnings). And entitles you to claim an itemized deduction for the total of your bet only to the range of your gains.

For lottery and winnings, you can either pay taxes on all the winnings in the year you receive the money (Lump-sum payment). Or, you need to pay gambling winnings tax on the amount you receive each year. This is applicable if your winnings are paid as an annuity.

Gambling Winnings Tax FAQs:

Whether it is money or prize, gambling winnings are considered income. Winnings in lotteries, wagers, bets, raffles, sports betting, prizes, awards, and contest are subjected to tax.

In gambling loss deduction, you can deduct gambling loss by itemizing your expenses when paying taxes. This includes expenses on wagers, bets, lottery tickets, and other gaming losses.

Whether it is online or offline gambling, you cannot avoid paying taxes on gambling winnings. And you still need to report your winnings in gambling online. As well as those winnings that do not have withholding tax. You must declare all your online winnings. You can also deduct your gambling loss from online gaming. You just have to keep a record so that the IRS allows you to claim a gambling loss deduction.