When Do I Have to Report Gambling Winnings to the IRS?

Winning money from gambling can be exciting, but it also comes with tax obligations. The IRS considers gambling winnings taxable income, meaning they must be reported on your tax return. Whether you win at a casino, lottery, or online betting platform, the amount and type of winnings determine how they should be reported.

Failing to report gambling income can lead to penalties and additional taxes. Understanding when and how to report these earnings is necessary to stay compliant with tax laws.

Types of Income That Must Be Reported

All gambling winnings, regardless of the amount, are considered taxable income by the IRS. This includes money won from casinos, lotteries, raffles, horse racing, sports betting, and even non-cash prizes like cars or vacations. If you win a non-cash prize, its fair market value must be reported as income. For example, a car worth $30,000 is treated as taxable income, just as if you had won the same amount in cash.

Online gambling and mobile betting apps are also subject to taxation. Whether you place bets through a sportsbook, participate in online poker tournaments, or win money from daily fantasy sports contests, all earnings must be reported. Even if the platform does not issue a tax form, you are still responsible for including the income on your tax return.

Gambling winnings are not limited to traditional games of chance. Sweepstakes, game shows, and promotional contests can also result in taxable income. If you win a cash prize from a radio contest or receive a large payout from a televised competition, the IRS expects you to report it. Some game shows allow winners to take a cash equivalent instead of a physical prize, which is also considered taxable income.

IRS Thresholds for Reporting Winnings

The IRS has specific thresholds for when gambling winnings must be reported. If your earnings exceed these amounts, the payer—such as a casino, sportsbook, or lottery organization—is required to issue Form W-2G, which details your winnings and any taxes withheld. These thresholds vary depending on the type of gambling activity.

For slot machines and bingo, winnings of $1,200 or more trigger a reporting requirement. Keno winnings must exceed $1,500 before a W-2G is issued. Poker tournament winnings are reported if they surpass $5,000, but this amount is calculated after subtracting the buy-in and entry fees. For sweepstakes, raffles, and other games of chance, the threshold is $600 or 300 times the amount of the wager, whichever is lower.

Sports betting and pari-mutuel horse racing have different criteria. If a single bet results in earnings of $600 or more and the payout is at least 300 times the wager, it must be reported. However, even if a W-2G is not issued, all gambling income must still be reported on your tax return.

Withholding Requirements

When gambling winnings reach certain amounts, federal income tax withholding may be required. The standard withholding rate is 24% if the amount exceeds $5,000. This applies to casino jackpots, lottery prizes, and sports betting payouts. The payer deducts this tax before disbursing the winnings and reports it to the IRS on Form W-2G.

If the winner does not provide a valid taxpayer identification number (TIN), the withholding rate increases to 28% under backup withholding rules.

State tax withholding may also apply, depending on where the gambling activity takes place. Some states, such as New York and Maryland, impose mandatory withholding on gambling winnings, while others do not. Rates vary, with some states withholding as little as 3% and others exceeding 8%. Residents of states with no income tax, like Texas or Florida, are not subject to state withholding but must still report winnings on their federal tax return.

Documentation Requirements

Keeping thorough records of gambling activity is necessary for accurate tax reporting and potential deductions. The IRS expects taxpayers to maintain a detailed log of both winnings and losses, including the date, location, type of wager, amounts bet, and amounts won or lost.

For frequent gamblers, maintaining a gambling diary can be useful. This record should include specific details such as the names of establishments or online platforms, game types, and supporting evidence like betting slips, receipts, or digital transaction statements. Many online gambling sites provide account histories, which can serve as documentation when reconciling earnings and losses for tax purposes.

Bank statements, credit card records, and check copies can further support gambling-related entries, particularly when cash transactions are involved. If audited, the IRS may request additional proof to verify winnings and losses, making it important to retain all relevant financial records. Professional gamblers, who report gambling activity as a business on Schedule C, must also track expenses such as travel, lodging, and entry fees to substantiate deductions.

Consequences of Underreporting

Failing to report gambling winnings can result in financial penalties, interest charges, and potential legal consequences. The IRS treats unreported income as tax evasion, and if discrepancies are discovered, taxpayers may face audits or additional scrutiny. Even if a W-2G was not issued, the IRS can still identify unreported winnings through financial records, casino reporting, or third-party payment processors.

Penalties for underreporting vary based on the severity of the omission. If the IRS determines that a taxpayer negligently failed to report income, they may impose an accuracy-related penalty of 20% of the underpaid tax. If fraud is suspected, the penalty increases to 75% of the unpaid amount. In extreme cases, willful tax evasion can lead to criminal charges, fines up to $250,000, and potential imprisonment. Interest also accrues on unpaid taxes from the original due date, increasing the financial burden.