Wisconsin Gambling Tax Rate: How Winnings and Losses Are Taxed
Understand how Wisconsin taxes gambling winnings and losses, including tax rates, reporting rules, deductions, and key considerations for residents and visitors.
Winning money from gambling in Wisconsin comes with tax obligations that many overlook. Whether from a casino, lottery, or sports betting, both state and federal governments expect a portion of your winnings. Failing to report these earnings properly can lead to penalties or unexpected tax bills.
Understanding how gambling income is taxed, what records to keep, and how losses can be deducted ensures compliance and may reduce your overall tax burden.
Tax Rates for Different Gambling Categories
Wisconsin taxes gambling winnings as regular income, with state tax rates ranging from 3.54% to 7.65%, depending on total taxable income. Larger winnings can push a taxpayer into a higher bracket.
All gambling winnings—whether from casinos, lotteries, raffles, or sports betting—are taxed the same under Wisconsin law, though reporting requirements vary. Winnings from the Wisconsin Lottery exceeding $2,000 are subject to an automatic 7.65% state withholding. Casino winnings do not have automatic state withholding unless they meet federal reporting thresholds.
Pari-mutuel betting, such as horse racing, follows the same tax rules. Online gambling, including daily fantasy sports, is also taxable, and winnings from platforms like DraftKings or FanDuel must be reported.
Withholding Requirements
Federal and state laws require withholding on gambling winnings above certain thresholds. The IRS mandates 24% withholding on winnings of $5,000 or more from sweepstakes, lotteries, and poker tournaments if the payout is at least 300 times the wager. Wisconsin does not impose additional mandatory withholding unless federal requirements apply.
Casinos and other gambling establishments must issue Form W-2G when winnings exceed reporting thresholds. This form is required for slot machine and bingo winnings of $1,200 or more. Table game winnings, such as blackjack or craps, generally do not trigger automatic reporting unless subject to withholding.
For non-cash prizes like cars or vacations, winners must cover the tax liability themselves. Those who fail to provide a valid Social Security number when claiming winnings may face backup withholding at 24%, reducing their payout. Professional gamblers who report earnings as business income may be exempt from withholding but must still track and report all winnings.
Reporting Methods
All gambling winnings must be reported as income on a federal tax return, regardless of the amount or whether taxes were withheld. The IRS requires taxpayers to list these earnings on Form 1040 under “Other Income” on Schedule 1. Even if a Form W-2G is not issued, individuals must report their full gambling income.
Wisconsin residents must also report gambling winnings on their state income tax return using Form 1. Winnings earned outside Wisconsin must be declared, though a credit may be available for taxes paid to another state. Those with multiple sources of gambling income should aggregate all earnings to ensure accurate reporting.
Taxpayers receiving a Form W-2G should verify its accuracy before filing. If discrepancies exist, such as incorrect amounts, they should contact the issuer for corrections. The IRS cross-checks reported earnings with W-2G forms submitted by gambling establishments, making underreporting a risk for audit.
How to Deduct Losses
Gambling losses can be deducted only if itemized on a tax return using Schedule A and only up to the total amount of reported gambling winnings. For example, if someone wins $10,000 but loses $12,000, they can deduct only $10,000. The remaining $2,000 cannot be carried forward or applied to other income.
To claim deductions, the IRS requires detailed records, including a log of wagers, winnings, and losses. Acceptable proof includes wagering tickets, receipts, bank statements, and loyalty program statements from casinos. Without proper documentation, deductions may be denied in an audit.
Recordkeeping Essentials
Accurate records of gambling activity are necessary for tax reporting and deductions. The IRS recommends keeping a gambling log with details such as the date and type of wager, location, amounts won or lost, and names of individuals present.
Casinos and online gambling platforms often provide account statements that can serve as documentation. Bank statements, credit card transactions, and wagering tickets also help verify reported amounts. Using a dedicated account for gambling transactions can simplify recordkeeping. Without sufficient records, deductions may be disallowed, increasing taxable income.
Potential Implications for Non-Residents
Non-residents who win money in Wisconsin must pay state taxes on their gambling income, even if they do not live there. Wisconsin does not have tax treaties that exempt non-residents from state income tax on gambling winnings. However, they may be able to claim a credit in their home state to avoid double taxation.
Non-residents must file Form 1NPR, Wisconsin’s non-resident tax return, to report gambling winnings earned in the state. If taxes were withheld at the time of payment, they may be eligible for a refund if their total tax liability is lower than the amount withheld. Failure to file a return or report winnings accurately can result in penalties and interest on unpaid taxes.