Key Points:
- *Any* casino wins, regardless of size are taxable whether you receive a W2G or not.
- A W2G will be generated and the win reported to the IRS for any slot win of $1,200 or more.
- Legislation has been proposed to increase that $1,200 threshold but hasn’t gained traction.
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.
My intent here 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, I’m a Vegas aficionado, not an accountant. 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’s no special gambling income tax rate; It’s simply treated as income, just like that earned at your day job.
Tax professionals often recommend keeping a log of gambling activity to include dates, 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 Tax Form 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 jackpot win provided you furnish a correct taxpayer identification number.
Instead, you’ll 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’re 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 nationals of select countries can 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. In addition to having an ID, ensure it isn’t expired as that will also cause issues.
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, no win threshold 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 threshold for generating a W2-G be increased?
Legislative Efforts
The current $1,200 threshold was established in 1977 and has not been adjusted for inflation since. Obviously, the value of $1,200 in 1977 is very different than today.
A bipartisan group of legislators in the U.S. House of Representatives that includes Dina Titus (D-NV) has introduced bipartisan legislation that would increase the win amount needed to trigger a W2-G to $5,000 from the current $1,200 benchmark, but efforts have been unsuccessful to this point.
Titus points out that “The current threshold for reporting slot winnings was set at $1,200 in 1977 and has not been updated in the 45 years since. If indexed for inflation, the threshold would be around $5,000. Due to inflation, the number of jackpots hitting that threshold, triggering a shut down of the machine and necessitating excessive paperwork requirements for the patron, has increased dramatically”.
Regulatory Developments
The IRS advisory council recently suggested that the threshold be increased from $1,200 to $5,800. Encouragingly, the panel even suggested the policy changes could be made by IRS themselves without supporting legislation.
At the end of the day, if you’re 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, or have specific questions about your situation, I’d recommend connecting with a tax professional to discuss the matter further.
See Also: Staying Downtown Las Vegas vs. on the Strip – I compare your options.
I’m a former software salesman turned Vegas aficionado. While the craps table is my preferred habitat, I pull myself away to explore new attractions, shows, restaurants, and outdoor activities around Las Vegas with the intent of sharing my experiences.
Ultimately, I just want to help folks plan a better trip and save a few bucks in the process.