Gambling Winnings and Taxes
Do I have to pay taxes on casino/online/other gambling winnings?
Yes, all gambling income is taxable.
Do online casinos report winnings to the IRS?
It depends on if you’re playing at licensed US online casinos or offshore casinos AND what games you’re playing. Offshore casinos that operate outside of US jurisdiction will not report winnings to the IRS. If you’re playing at a state-licensed online casino (ie. in a state with legal online gambling sites like Nevada, New Jersey, Pennsylvania, or Indiana) then the casino will report any video poker or slot machine win over $1,200, which you should receive form W2-G for reporting. Casinos don’t report winnings on table games unless you win $600 or more and 300x your wager.
If I gamble online at an offshore gambling site I don’t have to pay taxes because it’s overseas, right?
False. Under the US Tax Code, all income for US citizens is taxable, whether earned in the US, overseas, or on the Internet. Section 61(a) defines gross income as “all income from whatever source derived,” including gambling, unless otherwise provided. McClanahan v. United States, 292 F.2d 630, 631-632 (5th Cir. 1961).
Since online gambling is illegal in my state, shouldn’t I avoid disclosing my winnings?
False. The IRS is interested in collecting taxes, not where your gambling winnings came from. The US taxes legal and illegal income. Remember Al Capone? He went to prison for tax evasion, not for the murders he committed.
Since the government has no way of tracking how much I win, why should I report it?
Unless you’re audited for some other reason, the government is not likely to find out. However, if for whatever reason you are audited, and you have unreported income that the government finds out about, you will, at a minimum, pay tax, penalties, and interest. If the IRS determines that you willfully evaded taxes, you could even be subject to imprisonment.
Do you receive a 1099 for gambling winnings?
No, you should receive Form W-2G for gambling winnings.
I didn’t receive a W-2G, do I still have to report my gambling income?
Whether you receive paperwork or not, all gambling income is taxable.
Can I write off my gambling losses?
You may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040 or 1040-SR) (PDF) and kept a record of your winnings and losses. The amount of losses you deduct can’t be more than the amount of gambling income you reported on your return. Claim your gambling losses up to the amount of winnings, as “Other Itemized Deductions.”
To deduct your losses, you must keep an accurate diary or similar record of your gambling winnings and losses and be able to provide receipts, tickets, statements, or other records that show the amount of both your winnings and losses.
Are bank statements proof of gambling losses?
No. Since bank statements only show a withdrawal of cash or an electronic transfer (when gambling online), they don’t sufficiently prove the money was lost. However, bank statements can be used in combination with other receipts, tickets, statements, and documentation such as a diary or similar record of your losses and winnings to provide evidence of your losses.
Sources:
https://www.letsgambleusa.com/online-gambling-taxes/
https://www.irs.gov/taxtopics/tc419
https://www.irs.gov/pub/irs-pdf/p529.pdf (page 10)