In Drake18, the amount of gambling winnings flows to line 21 of Schedule 1 and then the sum of lines 10-21 flows to Form 1040, line 6. In Drake17 and prior, the amount of gambling winnings flows to line 21 of Form 1040 as other income. You can't deduct more in gambling losses than you have in gambling winnings for the year. For example, suppose you reported $13,000 in gambling winnings on Line 21 of Form 1040. Even if you lost. You must report all gambling winnings as 'Other Income' on Form 1040 or Form 1040-SR PDF (use Schedule 1 (Form 1040 or 1040-SR) PDF), including winnings that aren't reported on a Form W-2G PDF. When you have gambling winnings, you may be required to pay an estimated tax on that additional income.

Gambling Wins and Losses on a Tax Return Gambling wins are reported on the front page of Form 1040 for tax years 2017 and prior. Gambling wins are reported on Schedule 1, Line 21 for tax year 2018. All gambling wins are required to be reported even if the casino doesn’t report the win to the IRS.

Taxes are probably the last thing on your mind during an exciting gambling session. However, they inevitably come up following a big win or profitable year.

You may have two main questions at this point:

• Do I need to pay taxes on my wins?
• If so, how much do I have to pay?

The following guide discusses whether your gambling wins are taxable and other important topics regarding this subject.

The Short Answer Is Yes

I’ll cut right to the chase: yes, you do need to pay federal taxes on gambling winnings in the United States. This is especially true when you net a big win and receive a W-2G form.

According to the IRS, a gambling establishment should issue a W-2G when you win an amount that’s subject to federal income tax withholding (24% of win).

Slot machines present a famous example of when you’ll receive a W-2G form after winning so much. Casinos must issue a form when you win a prize worth $1,200 or more through slots or video poker.

As for the second point, a sportsbook or racetrack must withhold federal taxes when you win a bet worth 300x your initial stake. If you wager $5 and win $3,000, for example, then the bookmaker will issue a W-2G form and withhold $720 (24%).

Here’s a broader look at the W-2G and tax withholding threshold for different types of gambling:

• $600+ through sportsbooks and racetracks (provided it’s 300x your stake).
• $1,200+ through a slot machine, video poker machine, or bingo game.
• $1,500+ through keno.
• $5,000+ through a poker tournament.

All Winnings Are Subject to Taxation

Technically, you’re supposed to report any gambling winnings—big or small. Even if you win $20 in an office betting pool, the IRS wants to know about it.

If you want to stay above board, then you should report all wins on Form 1040 (under “other income”). As I’ll cover later, you can deduct losses from winnings as well.

Furthermore, any amount that’s withheld by a casino, poker room, sportsbook, or racetrack is deducted from what you owe. Gambling establishments keep 24% of a win when they do withhold money.

W-2G Forms Don’t Apply to Table Games

You’ll receive a W-2G when earning big wins through most types of gambling. However, casino table games are an exception to the norm.

Unlike a jackpot game (e.g. video poker) or a poker tournament, casinos have no idea how much money you start with in a table game. Therefore, they can’t really determine when you do and don’t experience big wins.

Examples of table games that are exempt from W-2G forms include:

• Baccarat
• Blackjack
• Caribbean stud
• Craps
• Roulette
• Three-card poker

The IRS still expects you to pay taxes on profits earned through table games. Again, though, the casino can’t issue a W-2G because they can’t tell how much money you’ve actually won.

Some States Tax Gambling Winnings

Most states tax your income, including gambling winnings. Depending upon where you live, you’ll probably need to pay taxes to both the IRS and your state.

For Example:

Michigan features a 4.25% flat income tax. The Wolverine State expects you to pay this same 4.25% rate on gambling wins.

West Virginia, on the other hand, doesn’t tax your winnings. Casinos/sportsbooks in the Mountaineer State only withhold federal taxes (when necessary).

Assuming you travel to another state to gamble, you may have two states wanting taxes. Luckily, though, you won’t be subject to double taxation.

Instead, your home state will give you credit for whatever taxes are paid to the state where the winnings occurred.

Can You Deduct Losses?

You can deduct gambling losses from winnings. However, these deductions are itemized rather than standard deductions.

Here’s an example to explain:

• You win $5,000 through sports betting.
• You lose $4,500.
• You must report the full $5,000—not $500 (5,000 – 4,500)—under other income.
• Meanwhile, the $4,500 is reported through various itemized deductions.

In short, itemized deductions are expenses that reduce your taxable income. The standardized variety includes flat-dollar, common deductions.

You may be able to save more money through itemized deductions. However, standard deductions are easier to deal with and also have the potential to save you more money.

Regardless, you must use itemized deductions when dealing with losses. This means spending more time on your tax returns or working with an accountant.

Keep in mind that you won’t receive a tax refund for gambling losses. Instead, you can only deduct an amount equal to your winnings each year. If you win $3,500, for example, then you can’t deduct more than $3.5k and expect a return.

Keep Records on Wins & Losses

The IRS may take your word at face value when it comes to gambling. Of course, they also have the ability to audit you when they deem it necessary.

That said, you don’t want to guestimate on your wins and losses. Instead, you want proof through the form of records.

Journals offer a great way to record your gambling activities. You can log the following for each entry:

• Date of gambling session
• Location of the establishment
• Game played
• Starting bankroll
• Ending bankroll

Such entries don’t guarantee you’re being honest. However, they at least show the IRS that you’re making a legitimate attempt at recordkeeping.

You can take your recordkeeping efforts even further by holding onto any other relevant documents. Betting slips, winning tickets, canceled checks, bank statements, W-2G forms, and anything else of relevance are all worth saving.

What Happens If You Don’t Report Gambling Winnings?

The IRS fully expects you to report gambling winnings and especially annual profits. They don’t take kindly to you failing to report these wins.

Of course, you’re unlikely to draw an audit for winning a $25 sports bet. You stand a higher chance of being audited, though, if you win enough for a W-2G form.

In this case, the casino/sportsbook/racetrack also sends a copy of the from to the IRS. The latter features reliable software that can match up your reported income with documentation of nonreported income.

Assuming you fail to report gambling winnings, then the IRS may do little more than send a letter and issue a small fine. You should definitely pay up, or at least work out a payment plan, in this case.

You’ll face more serious consequences, though, if you fail to report a huge win and lie about the matter when/if caught. Refusal to pay and/or heavy efforts to cover up the deceit will lead to bigger fines and possibly jail time.

Gamblers Stand Increased Chances of an Audit

Nobody likes attracting an audit from the IRS. Unfortunately, the chances of being audited increase for gamblers.

This is especially true when you net a big win and receive a W-2G. Of course, you can reduce the odds of being audited by claiming anything on the form.

The IRS may also become suspicious if you claim big losses on your tax return. You’ll put the taxman on increased alert when winning a huge prize (e.g. $50,000) and claiming a matching amount of losses.

Also, you can’t write off hotel stays, meals, and entertainment as a casual gambler. You must be a professional to claim such itemized deductions.

How Do Professional Gamblers Report Winnings?

Pro gamblers claim winnings on Schedule C as a self-employed person rather than as other income on Form 1040.

Even as a professional, you can’t deduct more losses than winnings in a year. You’re stuck in a tough situation with treating gambling as a day job, yet not being able to file losses that exceed winnings.

As mentioned before, though, you’re able to deduct business expenses like hotel stays and meals. These expenses just need to be a legitimate part of your business.

Conclusion

In answer to the original question, yes, you’re supposed to claim real money gambling winnings on federal tax forms. Even if you end up losing money on the year, the IRS wants to see your wins and losses.

Of course, tax collectors don’t care a great deal when you win $200 on the year. They spend most of their time looking for bigger winners.

The times when you want to be especially diligent in this matter include:

• When you book a large win and receive a W-2G form.
• If you win a significant amount of profits throughout the year.
• When you win 600x your bet with a sports or horse wager.

Gambling Winnings Form 1040

Again, the IRS and your state (if applicable) expect all gambling winnings to be reported. But you can use some commonsense in deciding when reporting wins are truly necessary.

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The glittering lights and ringing bells of the casino. The dream of winning the lottery. Gambling can be a lot of fun for most people, and when your number finally comes up -- well, isn't that the whole point?

Of course, we all want to go home big winners with a wad of cash in our pockets. However, once you win, the IRS does, too. In fact, they expect and require you to report your gambling winnings. Gambling winnings (which the IRS refers to as 'income') can include:

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• Lotteries
• Raffles
• Horse/dog races
• Noncash prizes -- like cars, trips or houses

What you need to report depends on how much you win, what type of gambling you were doing, and the ratio of your winnings to your wager.

Typically, you'll receive paperwork from the casino (or other source of your payout) to complete if you win a certain amount. You must provide your Social Security number and fill out IRS Form W-2G. This form is called 'Certain Gambling Winnings,' and allows you to report your winnings as income to Uncle Sam. You'll receive that paperwork if you win:

• $600 or more from the state lottery, horse or dog races, jai alai or other wagering (but only if the winnings are 300 times the original wager)
• $1,200 or more at a slot machine or bingo
• $1,500 or more on keno (minus the amount you spent on tickets for the winning game)
• $5,000 or more in poker tournaments

Typically in a winner situation of $5,000 or more (no matter what the game), the payee will not only require you to fill out the above-mentioned forms, but will also take 25 percent of your winnings up front to give directly to Uncle Sam [source: Bell]. If you refuse to fill out the form or provide your Social Security number, most establishments will take 28 percent of your winnings, in accordance with federal law [source: IRS].

You don't have to fill out the W2-G form for winnings on table games, including craps, blackjack, pai gow, baccarat and roulette. However, you still have to report those winnings when you file your regular income tax in April. On form 1040, on the 'Other Income' line (line 21) you report any other winnings, like prize or award money.

Here's where things can get a little more complicated. Just as you report your winnings to the IRS, you can also report your losses. On line 28 of form 1040, 'Other Miscellaneous Deductions,' if you have any gambling losses, note them there. However, your losses can't exceed your winnings. It's also important to note that you'll only want to do this if you're already itemizing your deductions and will end up deducting more than the standard [source: IRS]

All of this information illustrates why it's crucial to keep detailed records of your gambling -- both wins and losses -- especially if you do it often . Signing up for a player's card at a casino is a great idea, because the casino keeps an electronic record for you to easily access [source: Taxpertise].

Is Gambling Winnings Reported On A 1040 Form

The takeaway here is that the IRS treats any gambling or contest winnings as income. You should report all of it, even if the casino or other payee doesn't hand you a tax form to fill out. State tax laws apply too so be sure to check with your state's department of revenue to determine your liability [source: Ritchie].

Where To Report Gambling Winnings On Form 1040

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Sources

Where Do I Put Gambling Winnings On Form 1040

• Bell, Kay. 'Reporting gambling winnings.' Bankrate. Feb. 3, 2014. (Sept. 22, 2014) http://www.bankrate.com/finance/money-guides/reporting-gambling-winnings.aspx
• IRS. 'Gambling Winnings Are Always Taxable Income.' Aug. 19, 2014. (Sept. 22, 2014) http://www.irs.gov/uac/Gambling-Winnings-Are-Always-Taxable-Income
• IRS. 'Instructions for Forms W-2G and 5754.' 2014. (Sept. 22, 2014) http://www.irs.gov/pub/irs-pdf/iw2g.pdf
• Ritchie, Josh. 'How Are Gambling Winnings Taxed?' TurboTax Blog. March 30, 2012. (Sept. 22, 2014) http://blog.turbotax.intuit.com/2012/03/30/how-are-gambling-winnings-taxed/
• Roche, Yolanda S., E.A. and Roche, Roger C., E.A. 'The Taxman Cometh.' Las Vegas Review-Journal. 2014. (Sept. 22, 2014) http://www.reviewjournal.com/business/casinos-gaming/features/taxlaws.html
• Taxpertise. 'Uncle Sam Wants His Cut on Your Gambling Winnings.' FOXBusiness. Sept. 20, 2013. (Oct. 30, 2014) http://www.foxbusiness.com/personal-finance/2013/09/19/uncle-sam-wants-his-cut-on-your-gambling-winnings/