Saving & Spending Taxes

4 Must-Know Tax Rules for Anyone Who Gambles (Even Occasionally)

Make sure you don't run into any tax problems after you gamble.

By Georgina Tzanetos

Edited by Grace Cooper

Updated Jan. 22, 2025

When partaking in an exciting gamble, you're left on the edge of your seat the entire time knowing you will leave with either full or empty pockets. Whether you walk away a winner or end up on the losing side, the tax implications are one aspect of gambling that often goes overlooked.

From sports betting to casino games, lotteries, and online gambling, understanding how your winnings and losses affect your taxes is crucial for you to avoid making mistakes, stay compliant, and prevent surprises down the road.

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today — because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

How to become a member today:

Go here, select your free gift, and click “Join Today”
Create your account (important!) by answering a few simple questions
Start enjoying your discounts and perks!

Important: Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up 25% off your AARP membership, making it just $15 the first year with auto-renewal.

Become an AARP member now

Winnings aren't free

It's easy to get caught up in the excitement of winning a bet, but the reality is that nearly half of those winnings could be owed as taxes. The Internal Revenue Service (IRS) considers all gambling winnings as taxable income, regardless of whether you're a professional gambler or just a casual bettor.

The general rule of thumb is if you win big, you're going to have to pay Uncle Sam first. This means that if you've got a winning bet, you'll likely owe taxes on your winnings, including both federal and state taxes in most cases.

Who really has the cheapest auto insurance in your area? Check your zip code here.

Losses can pay off

While you may be able to deduct gambling losses and keep more cash in your wallet, there are limitations to this deduction. Gambling losses can only be deducted as an itemized deduction, meaning you'll need to forego the standard deduction and instead itemize your expenses.

Additionally, your gambling losses cannot exceed the winnings you report as income. This prevents taxpayers from offsetting other income with gambling losses. However, including the initial wager of a bet as part of your losses can help mitigate your taxable income.

You have to fill out paperwork

If your winnings reach a certain threshold, the gambling vendor will likely send you a W-2G tax form, reporting your earnings to the IRS. However, even if you don't receive this form, you're still responsible for reporting all your gambling income accurately.

It's not usually common knowledge, but if you're placing bets of any kind, you need to file form W-2G. This counts for winnings above $600 from lotteries and horse races; $1,200 or more from bingo or slot machines; $1,500 or more from keno (without the wager); or $5,000 or more from poker tournaments.

Resolve $10,000 or more of your debt

Credit card debt is suffocating. It constantly weighs on your mind and controls every choice you make. You can end up emotionally and even physically drained from it. And even though you make regular payments, it feels like you can never make any progress because of the interest.

National Debt Relief could help you resolve your credit card debt with an affordable plan that works for you. Just tell them your situation, then find out your debt relief options.¹ <p>Clients who are able to stay with the program and get all their debt settled realize approximate savings of 46% before fees, or 25% including our fees, over 12 to 48 months. All claims are based on enrolled debts. Not all debts are eligible for enrollment. Not all clients complete our program for various reasons, including their ability to save sufficient funds. Estimates based on prior results, which will vary based on specific circumstances. We do not guarantee that your debts will be lowered by a specific amount or percentage or that you will be debt-free within a specific period of time. We do not assume consumer debt, make monthly payments to creditors or provide tax, bankruptcy, accounting or legal advice or credit repair services. Not available in all states. Please contact a tax professional to discuss tax consequences of settlement. Please consult with a bankruptcy attorney for more information on bankruptcy. Depending on your state, we may be available to recommend a local tax professional and/or bankruptcy attorney. Read and understand all program materials prior to enrollment, including potential adverse impact on credit rating.</p>

How to get National Debt Relief to help you resolve your debt: Sign up for a free debt assessment here. (Do not skip this step!) By signing up for a free assessment, National Debt Relief can assist you in settling your debt, but only if you schedule the assessment.

Try it

There are consequences of not reporting

Failing to report gambling income can lead to serious consequences. The IRS has various methods of uncovering discrepancies, such as comparing your reported income to the W-2G forms they receive or scrutinizing your bank deposit activity.

If you're caught underreporting your gambling winnings, you could face a 20% penalty on the underreported amount or even risk jail time for larger sums. It's crucial to comply with tax reporting requirements to avoid these potential repercussions.

Bottom line

In the aftermath of any gambling endeavor, it's essential to consider the tax implications of your betting activities. Understanding your tax obligations can prevent unpleasant surprises when it comes time to file your taxes.

Remember, accurately reporting your gambling income and losses is not only a legal requirement but also a crucial step in maintaining compliance with tax laws. By staying informed and proactive about your tax responsibilities, you can navigate the complexities of gambling with confidence and peace of mind as you make money moves.

More from FinanceBuzz: