Whether it’s a big payout on the slots, a parlay that hits, or a lucrative night at the racetrack, gambling winnings are classed as income and therefore considered to be taxable.
New York has some of the highest tax rates in the US. The state collected over $300 million in under six months once online sports betting was legalized in January 2022. It is a legal requirement that gambling profits are reported on federal and New York tax returns.
Working out how much you owe in betting taxes can be a headache. Keeping track of your winnings and losses is the best way to do this as well as using a free gambling returns tax calculator. Entering a few details will show you how much tax you owe and the amount of betting winnings that you can keep.
Tax Paid on Gambling Winnings: $ 0
You Keep From Your Gambling Winnings: $ 0
When you win above a certain amount from any form of regulated gambling in New York it will automatically be subject to tax. Most sportsbooks and casino operators, whether online or in-person, will withhold part of your winnings for tax, but you still need to be aware of your own obligations under the law.
It’s not just sports betting that is considered taxable either. Income from casino games, bingo, poker tournaments, keno, lotteries, horse and dog races, off-track wagering, sweepstakes and even game shows can be taxed. It’s also the case that prizes won in a raffle or other competitions can be considered for tax at their ‘fair market value’ as can winnings from participating in fantasy sports, as well as from betting on real sports on platforms like FanDuel or DraftKings.
Gambling winnings in New York are taxed via the IRS for the federal government and the Department of Taxation and Finance in the state. New York City residents and some in Yonkers also pay an additional income tax.
In New York, the tax rate paid by inhabitants is dependent on annual income. This determines the tax bracket that applies. When you add gambling winnings to annual income then it’s possible to jump up a tax band.
New York has some of the heaviest gambling tax rates in the nation. The 51% rate on gambling operator’s revenues tops every other US state and NY bettors can pay up to 12.7% tax on winnings as well as handing a chunk to the IRS.
Gambling winnings have a 24% federal tax rate applied to them. New York State tax rates vary from 4% to 10.9% depending on annual income. The higher your taxable income, the higher your state tax banding. The rate also depends on whether you’re single or married and whether your file tax returns separately or jointly. If you live in New York City, there’s an additional municipal income tax too that ranges from 3.078% to 3.876%.
|
Tax Rate |
Income if Single |
Income if Married |
|
4% |
$0 - $8,500 |
$0 - $12,800 |
|
4.50% |
$8,501 - $11,700 |
$12,801 - $17,650 |
|
5.25% |
$11,701 - $13,900 |
$17,651 - $20,900 |
|
5.90% |
$13,901 - $21,400 |
$20,901 - $32,200 |
|
5.97% |
$21,401 - $80,650 |
$32,201 - $107,650 |
|
6.33% |
$80,651 - $215,400 |
$107,651 - $269,300 |
|
6.85% |
$215,401 - $1,077,550 |
$269,301 - $1,616,450 |
|
9.65% |
$1,077,551 - $5,000,000 |
$1,616,451 - $5,000,000 |
|
10.30% |
$5,000,001 - $25,000,000 |
$5,000,001 - $25,000,000 |
|
10.90% |
$25,000,001 + |
$25,000,001 + |
Do I Need to Report Gambling Winnings?
The golden rule when it comes to gambling winnings is to report everything. It's better to do this than run the risk of under-reporting. The chances of an IRS audit may be low, but getting into a wrangle with them down the road can be time-consuming and messy.
How gambling winnings and taxes are notified and collected can be somewhat laborious. Winnings that exceed a certain threshold automatically trigger a notification to the IRS. In many cases, federal taxes are withheld from your payout.
The payor (i.e. the sportsbook, casino, lottery operator etc.) is required to complete a specific form. This W-G2 form outlines the amount won and the tax value, if any, that was taken.
The bettor will also receive a W-G2 form when payouts during the previous calendar year exceed certain thresholds as applied by the IRS. These are:
Remember that those levels are cumulative ones per year. So, if you win six bets of $100, you reach the threshold. You'll also need to report non-cash prizes such as a television, a car, or a vacation.
It gets a bit more complicated if you hop across the bay to gamble in New Jersey or any other state in which betting is legal for that matter. If so, you might have to complete a non-resident return for any winnings above $5,000. You should still receive a WG-2 for these though.
Even if no tax was withheld or a W-G2 form isn't received, you will still have to report all gambling income on your federal and state tax returns. If you do win big, you should consult a tax consultant before doing anything with the proceeds. They'll be able to accurately advise on how much to set aside for tax but also on any strategies that could reduce your overall tax burden.
All gambling income is likely to be taxable. For example, it's not the case that only sports betting winnings over $600 need to be reported to the IRS. It is the law that gambling winners must report all winnings on their federal income tax return.
Any gambling winnings that are eligible for federal reporting will follow the same principles for local New York taxes. When you collect your payout, the gambling company will provide you with an IT-2102-G form. This acts in the same way as the WG-2 form and displays the amount held back for state taxes.
You'll now need to transfer the information from all of your WG-2 forms to your federal income tax return. Add up all the winnings figures and list them under the ‘other income' section on your 1040 return - line 8 to be precise. If you're a professional gambler then the entry goes on Schedule C, just as it would for any business income.
For residents of New York, the equivalent form for local taxes is IT-201. Specify an income figure as gambling winnings on this document and you'll also need to report any money that was withheld by a gambling operator.
For a futures bet - one that might straddle more than one tax season - you report the winnings as income at the point that you receive them rather than the year in which the wager was placed.
Whether you choose to report all proceeds from gambling is a personal decision. However, bear in mind that if you've received a WG-2 form then so too did the IRS. Also, with so much betting and gaming now carried out online, there's a trail for all activity. This makes tracking what you've wagered, won and lost a lot easier but it's also easier for the IRS to check on anyone's gambling history. Also, when you sign up with any online sportsbook or casino, you'll be asked to submit your ID and Social Security number.
You won't receive a W-2G form for any gambling winnings that did not meet the thresholds described above. If you were expecting to get a W-2G form for relevant earnings, it may be that the operator had recorded some incorrect information resulting in the documentation being misdirected. Contacting the relevant gambling company should resolve this and a form sent to you quickly.
Even if you don't receive some W-2G forms, you do still need to report gambling winnings as part of your annual income tax return. It's not enough to decide that because you didn't get a piece of paper, then the IRS won't know about it. If you can't recall how much you won then accessing online betting accounts or taking a look at bank and credit card statements will help.
After all that, it might be some consolation to learn that gambling losses are deductible but only if you’re able to itemize them. For most filers, this won’t be possible as they’ve accepted the standard deduction as a default option and won’t be able to itemize them.
If you can itemize gambling losses, you’re only able to deduct them up to the value offset by winnings. That means if you lost $5,000 and won £2,000 in the previous year, you can only deduct a maximum of $2,000. The IRS might also ask you to provide records of winnings and losses. Again, that will mean referring to WG-2 forms and these can be supplemented with wagering tickets and banking statements.
Don’t make the mistake of working out your losses and subtracting them from your winnings figure. You’ll need to separately list the two numbers to satisfy IRS requirements and ensure you’re not underreporting.
It’s also worth pointing out that you can only deduct actual losses. Other expenses incurred while you were gambling such as food, accommodation and transport are not deductible.
You’ll have figured by now that it’s good practice to keep records of your gambling winnings and losses along with any related documents. Indeed, the IRS insists on it - saying you must keep detailed records and that it is sensible to maintain a gambling log.
This need not be too onerous. It means keeping hold of all WG-2 forms plus any in-person betting tickets, receipts and gambling account statements. The IRS could also ask for dates, the name and address of the establishment at which you were gambling, plus the identity of other persons who were present at the time.
To make life easier, it’s also a great idea to maintain a simple spreadsheet to record all of your gambling activity. This is a good way to track your bets, wins and losses, and to inform your overall wagering strategy and identify trends. It’s also sensible to ensure you’re not losing track of your bankroll and betting more than you intended.
