If you have an upcoming trip to Las Vegas, or any casino for that matter, chances are you’ve had dreams of hitting a big jackpot. After all, what would be sweeter than funding your entire trip, or early retirement, with one lucky hit. What most people fail to think about, however, are the tax implications caused by a big slot win.
Our intent is to give gamblers a high level overview of how federal taxes work when it comes to slot jackpots in Vegas, and around the country. Keep in mind, we’re Vegas aficionados, not accountants. Seek professional help if you need real world or situational advice.
When do you need to pay taxes on gambling wins?
This answer is simple: anytime you win. That goes for any type of gambling income you earn whether on the slots, table games, lottery tickets, horse racing, or a friendly bet with your neighbor Jim. If you profited, even $5, the IRS wants their cut. Gambling wins are added to your income and taxes are paid at your marginal rate. There is not a special gambling income tax rate; It is simply treated as income, just like that earned at your day job.
Tax professionals often recommend keeping a log of gambling activity to include date, games played, and profit/loss over the session so that you have a record of your activity over the year.
Although the IRS wants a cut of ANY gambling win (whether big enough to generate a tax form or not), most recreational gamblers don’t keep a detailed record of their wins/losses for tax purposes (tisk, tisk, tisk). Most are more concerned about wins large enough to trigger a mandatory W2-G. A W2-G is a federal tax form notating your income from gambling activity that the casino generates at certain win thresholds (discussed below) and is reported to the IRS.
Since the generated W2-G detailing the win is sent to the IRS, players would be risking an audit if the income isn’t declared on that year’s tax return.
Keep in mind, gambling wins can be offset on your federal taxes by losses incurred over the year, but only if you itemize your deductions. Since the standard deduction was recently increased significantly, fewer people itemize making it a challenge for some to avoid paying taxes on their win. While losses can be used to offset your big wins, you can only deduct losses up to the amount you reported as won.
How much do you have to win to trigger a W2-G at the casino?
Depends on the game. The IRS has set the following guidelines for common games:
- $1,200 bingo or slot win (not reduced by the wager).
- $1,500 or more from a keno game (reduced by the wager).
- $5,000 or more from a poker tournament (reduced by the buy-in).
- $600 or more at the horse track if your win is 300x greater than your original bet.
Will the casino withhold money from your slot jackpot?
The casino is not required to withhold taxes from your big win provided you furnish a correct taxpayer identification number. Instead, you will simply pay taxes on that income at the end of the year. Many casinos, however, will withhold a percentage of your win if requested to help you avoid a big tax surprise at the end of the year.
If you are unable to provide a tax identification number (social security number), your jackpot will be withheld at a rate of 24% (reduced from 28% as of 2018).
Foreign gamblers that hit jackpots are always withheld at a rate of 30% although some nationals of select countries are able to recoup all or a portion of that withholding.
On a separate note, always carry an I.D. as your jackpot will not be paid unless you can supply one.
Will a W2-G generate as a result of a large table game win?
Nope. Although income earned on games like Blackjack, Roulette, Craps, etc. is taxable, there is no win threshold that would trigger a W2-G, nor will your win be proactively reported to the IRS. The exception to this would be if you hit a side bet or progressive jackpot that is 300x the bet made.
Could the slot win threshold for generating a W2-G be increased?
The original threshold of $1,200 was established in 1977 and has not been adjusted for inflation since. U.S. Representatives Darin LaHood (R-ILL) and Dina Titus (D-NV) recently pushed the Department of the Treasury to increase the win amount needed to trigger a W2-G to $5,000 from the current $1,200 benchmark. Titus and LaHood point out that the amount of $1,200+ jackpots have increased over time and that the current threshold creates an undue burden on casinos which takes the form of machines sitting locked up while excessive paperwork is completed.
This request to increase the threshold comes just a few years after the IRS considered lowering it to $600. At that rate, slot players would spend more time filling out paperwork than hitting spin.
At the end of the day, if you are worried about taxes, something good has happened. Congrats! Let’s hope that in the coming years, the threshold for triggering a W2-G on slot wins can be increased to lessen the burden on both players and casinos alike.
If you are curious about learning more about taxes for gambling, we recommend checking out Jean Scott’s “Tax Help for Gamblers” (available on Amazon) which dives into the weeds of how the federal government, as well as all 50 states, handle gambling income.