Online Gambling Taxes in the US

What Gambling Winnings Are Taxable in the US?

The IRS considers all gambling winnings to be taxable income. Here are some examples:

This is not an exhaustive list. Essentially, any money or prizes that you win will be treated as taxable income, and you’re required to declare it when filing your tax return.

Overview of Gambling Tax Law in the United States

You will need to pay federal income tax on your gambling winnings. Any winnings that you earn in a particular year will be added to your other forms of income, such as your salary, bonuses, dividends, and any capital gains.

Your federal income tax rate will then be determined by your total income for the year, along with your marital status. These are the current income tax brackets:

If you win a substantial amount of money, the payer (for example, the online casino or sports betting site) is supposed to take a 24% withholding tax. For example, let’s say you win $100,000 at a casino. The casino is instructed to hold $24,000 back for federal taxes, meaning you’ll be paid $76,000.

These are the current thresholds at which the 24% withholding tax is supposed to be taken:

The payer is also instructed to provide you with a Form W-2G document when it takes a withholding tax. A copy of the Form W-2G will also be sent to the IRS, so the authorities will know that the withholding tax has been taken.

However, it’s important to note that the 24% withholding tax is an estimate:

• You may end up getting most of it back after filing your tax return.
• Alternatively, you may end up owing more.

As discussed below, you can deduct your gambling losses from your winnings when filing your tax return. This can potentially wipe out most of your liabilities, so you may be able to claim the withheld tax back.

State Gambling Tax Rules

You’ll also need to pay a separate personal income tax on your gambling winnings in most states. Only nine states do not levy a personal income tax:

That means you’ll pay taxes on gambling winnings in the other 41 states, plus the District of Columbia. This table highlights the tax rate for gambling winnings and other forms of personal income in each state:

The local taxes can increase your liabilities. For example:

• If you live in New York City, you’ll pay a local gambling winnings tax, on top of your federal and state income tax. The city has four tax brackets, ranging from 3.078% to 3.876%.
• Meanwhile, if you win money at Empire City Casino in Yonkers, but you’re not a Yonkers resident, you’ll pay a flat 0.5% local gambling tax on your winnings.

There are local income taxes in various other cities and counties across the country. However, gambling winnings aren’t always treated as taxable income in those cities and counties. For example:

• Some municipalities in Pennsylvania levy local income taxes, ranging from 1% to 3.75%. This is known as Local Earned Income Tax.
• However, gambling winnings are treated as non-taxable income when filing a local earned income tax return.
• In that regard, they have the same status as old age benefits, child support, dividends, unemployment compensation, and other non-taxable income streams.

If you’re in a city or municipality that levies a local income tax, check if gambling winnings are viewed as taxable or non-taxable income.

How to Report Gambling Winnings on Your Taxes

Follow these steps to report your gambling winnings on your federal tax return:

Make sure you attach the Schedule 1 document, plus any W2-G forms, when you file Form 1040.

Deducting Losses

You can deduct your losses from your gambling winnings when filing your taxes. As things currently stand, this means you’ll only pay gambling tax if you earn an overall profit from all gambling activities in a particular year.

Your deductions cannot exceed your winnings. For example:

• Let’s say you earn $100,000 from winning bets in a particular year. You also lose $105,000 from unsuccessful bets.
• That means you can reduce your tax liabilities to zero, as you lost more than you won during the year.
• However, you cannot deduct the additional $5,000 from any other income earned that year, such as your salary and bonuses.
• You also cannot deduct auxiliary expenses, such as transport to a casino, food, and beverages, unless you’re a professional gambler.

If you’d like to deduct your losses from your gambling winnings for tax purposes, follow these steps:

• Download Schedule A (Form 1040). Head to Line 17 and enter your gambling losses. They cannot exceed the winnings that you declared in Schedule 1 (Form 1040).
• On the main Form 1040, you can head to Line 12 and enter the losses that you declared in Line 17 of the Schedule A form.

You’ll also need to submit evidence of your gambling losses. For example, you could provide:

• Your credit card bill or bank statement.
• Any losing tickets from a sportsbook, racetrack, or lottery.
• A detailed, itemized log of your wins and losses throughout the year. 

Big Beautiful Bill Places a 90% Cap on Gambling Deductions

President Donald Trump’s so-called One Big Beautiful Bill has introduced a cap on deductions for gambling losses. Here are the details:

• From January 1, 2026, gamblers will only be permitted to deduct 90% of their gambling losses from their gambling winnings when paying federal taxes.
• That represents a major shift from the current policy, which allows gamblers to deduct 100% of their losses from their winnings.
• The Joint Committee on Taxation forecasts that the change will raise approximately $1.1 billion over a 10-year period.

Suffice to say, this has caused alarm among gamblers and gambling operators alike. Rep. Dina Titus (D-Nev.) and Rep. Ro Khanna (D-Calif.) responded by introducing a bill called FAIR BET (the Fair Accounting for Income Realized from Betting Earnings Taxation Act). This bill seeks to restore the previous standard, allowing gamblers to fully deduct losses when they report their winnings. Other lawmakers are also pushing to repeal the provision, so it may potentially be axed before January 1.

Land-Based vs. Online Casinos and Sportsbooks

Your tax rate for gambling winnings will be the same, regardless of whether you win at a land-based establishment or a real money casino or sportsbook. However, it’s easier to keep track of your wins and losses when you gamble online. There are some key differences in terms of Form W2-G issuance too:

That means the IRS won’t be informed when you secure a large win at an offshore gambling site. However, it may still be sensible to declare your winnings from offshore casinos and sportsbooks when filing your taxes. Here’s why:

Unique Tax Situations

There are a few unique situations where your gambling taxes might change:

Gambling Winnings for Non-US Citizens

If you’re not a US citizen or green card holder, but you win money at a US lottery, casino, poker room, or sportsbook, you’re still subject to income tax. The gambling operator is required to withhold 30% of the payout, unless an exception applies. You’ll receive a Form 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding).

You may be able to claim a refund by filing Form 1040-NR (U.S. Nonresident Alien Income Tax Return). Attach the Form 1042-S, along with your Individual Taxpayer Identification Number, and request a refund if too much was withheld or there is a tax treaty. For example, Canadians can claim a refund due to a treaty.

Crypto Gambling Winnings

All Crypto casinos and sportsbooks are based overseas, and they won’t withhold tax or issue a Form W2-G when you win big. However, it’s still advisable to declare your crypto gambling winnings when filing your federal tax return, as there can be serious consequences if the IRS believes that you intentionally concealed your gambling income.

Professional Gamblers

The IRS recognizes professional gambling as a trade or business. This comes with unique rules, certain benefits, and some complications.

Professional gamblers don’t report their winnings as “Other Income” on Schedule 1 (Form 1040). They report income and expenses on Schedule C (Profit or Loss from Business), just like self-employed workers.

That means you can deduct business expenses, such as travel to poker tournaments, hotel stays, software subscriptions, and so on. However, even as a pro, you can’t claim a net loss from gambling, due to Section 165(d) of the tax code.

You also need to qualify as a professional in the eyes of the IRS, so you must treat gambling as your main source of income, adopt a business-like approach, keep detailed logs, and engage in regular gambling.

Ask an Expert

How do I prove gambling losses on my taxes?

Anonymous, July 27, 2025

Answer

Taylor Smith, July 27, 2025

The best way to prove your gambling losses is to keep a detailed, itemized log of all gambling activities over the course of the year. Supply as much evidence as possible, including your betting history at gambling sites, your credit card and bank statements, and any other tickets and receipts.

Do senior citizens have to pay taxes on gambling winnings?

Anonymous, July 24, 2025

Answer

Isaac Payne, July 25, 2025

Yes, senior citizens must pay taxes on gambling winnings. Your gambling income is fully taxable and must be reported, regardless of your age or retirement status. If you collect social security benefits, gambling winnings will count towards your provisional income, meaning they can push you into a higher tax bracket. They may also impact Medicare premiums.

Are gambling losses tax deductible?

Anonymous, July 25, 2025

Answer

Isaac Payne, July 26, 2025

Yes, gambling losses are tax deductible. You can deduct your losses from any winnings earned, which can reduce or eliminate your tax liabilities. However, from January 1, 2026, the federal government plans to introduce a 90% cap on deductions from gambling losses.

Tax Resources for Gamblers

• IRS – Gambling Income and Expenses
• IRS Topic No. 419, Gambling Income and Losses
• IRS Publication 505, Tax Withholding and Estimated Tax
• IRS Publication 529, Miscellaneous Deductions

Summary

You’ll need to pay taxes on gambling winnings in the US. Your winnings will be added to any other income you earn, and your federal income tax rate will be determined by the bracket you fall into. State gambling taxes and local taxes may also be due, depending on where you live.

Deducting your losses can substantially reduce your liabilities. However, it’s important to keep a meticulous record of your wins and losses throughout the year, as that will allow you to substantiate your claims.