What Are the Rules for the NYS Gambling Tax?

In New York State, proceeds from gambling are considered taxable income, similar to wages and other earnings. Individuals are responsible for reporting this income on their annual tax filings. The state’s tax laws require that taxpayers account for the full amount of their winnings, which are then subject to state and, in some cases, local income taxes.

Identifying Taxable Gambling Winnings

All gambling winnings are subject to New York State tax, regardless of the amount. It is a common misconception that winnings are only taxable if a tax form is issued; you are required to report all winnings. This includes money and prizes from activities such as:

• New York Lottery games, including scratch-offs and multi-state games like Powerball if the ticket was bought in New York
• Casino games like slot machines and table games
• Sports betting
• Horse racing
• Charitable bingo or raffles

The tax rules extend to non-cash prizes as well, such as cars or vacations. In these instances, the taxable amount is the fair market value of the prize. For New York residents, this tax liability is not confined to winnings within the state. If a New York resident wins money in another state, they are still required to report that income on their New York tax return. They may, however, be able to claim a tax credit for any income taxes paid to the other state.

Non-residents who win in New York also have tax obligations. Winnings over $5,000 are considered New York source income and subject to state tax, and payers are often required to withhold taxes. Non-residents must file Form IT-203 to report this income.

Required Tax Forms and Recordkeeping

Payers are required to provide you with a Form W-2G, “Certain Gambling Winnings,” for certain winnings. This form is triggered by federal thresholds, which New York follows. For instance, you will receive a W-2G for winnings of $1,200 or more from a slot machine or bingo game, or for winnings of $5,000 or more from a poker tournament. Another trigger is winning $600 or more if the payout is at least 300 times your wager.

The Form W-2G will show your gross winnings, the date of the win, and the amount of any federal or state income tax that was withheld. Payers are required to withhold federal tax at a rate of 24% on winnings over $5,000. New York also requires withholding for lottery winnings over $5,000 at a rate of 8.82%. You should receive a copy of this form by January 31st of the year following your win.

You are responsible for keeping detailed records of your gambling activities in a diary or log. For each time you gamble, you should record the date, the type of gambling, and the name and address of the establishment. You must also track the specific amounts you won and lost during each session, as this log is necessary for accurately reporting winnings and substantiating any losses.

Deducting Gambling Losses in New York

New York State allows taxpayers to deduct gambling losses, but there are specific rules. The primary rule is that you can only deduct losses up to the amount of your reported gambling winnings for the same year. You cannot deduct more in losses than you won or use losses to reduce other types of income.

To claim these losses, you must itemize your deductions on your federal return by filing Schedule A with Form 1040. If you take the standard federal deduction, you cannot deduct gambling losses. You then calculate your New York itemized deductions using Form IT-196, and the losses claimed on your federal return are carried over to this form.

Reporting Winnings and Paying the Tax

For full-year New York residents, gambling winnings are reported on Form IT-201, the “Resident Income Tax Return.” The total amount of your winnings, including those not reported on a W-2G, should be entered on the “Other Income” line.

If New York State income tax was withheld from your winnings, as shown on Form W-2G, you can claim this as a credit. This amount is entered in the section for New York tax withheld. If you are itemizing to claim gambling losses, the total from Form IT-196 is entered on the appropriate line of Form IT-201.

Your gambling income is added to all your other sources of income, and the total is taxed at your marginal state income tax rate, which ranges from 4% to 10.9%. Residents of New York City or Yonkers may also be subject to local income taxes on these winnings. If you still owe tax after accounting for withholdings and credits, you can pay online through the Department of Taxation and Finance website or by mailing a check with your return.