You definately do not need to fill out w-2's on winnings in blackjack, 3-card poker, baccarat, roulette because they don't pay those kind of odds. When you add that it's gambling winnings we're talking about, the idea that anything isn't taxed is, well, too good to be true. The black letter rule is that everything is income for tax purposes. File Form W-2G, Certain Gambling Winnings, to report gambling winnings and any federal income tax withheld on those winnings. The requirements for reporting and withholding depend on the type of gambling, the amount of the gambling winnings, and generally the ratio of the winnings to the wager. File Form W-2G with the IRS.
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Do you like to gamble? If so, then you should know that the taxman beats the odds every time you do. The Internal Revenue Service and many states consider any money you win in the casino as taxable income. This applies to all types of casual gambling – from roulette and poker tournaments to slots, bingo and even fantasy football. In some cases, the casino will withhold a percentage of your winnings for taxes before it pays you at the rate of 24 percent.
Casino Winnings Are Not Tax-Free
Casino winnings count as gambling income and gambling income is always taxed at the federal level. That includes cash from slot machines, poker tournaments, baccarat, roulette, keno, bingo, raffles, lotteries and horse racing. If you win a non-cash prize like a car or a vacation, you pay taxes on the fair market value of the item you win.
By law, you must report all your winnings on your federal income tax return – and all means all. Whether you win five bucks on the slots or five million on the poker tables, you are technically required to report it. Job income plus gambling income plus other income equals the total income on your tax return. Subtract the deductions, and you'll pay taxes on the resulting figure at your standard income tax rate.
How Much You Win Matters
While you're required to report every last dollar of winnings, the casino will only get involved when your winnings hit certain thresholds for income reporting:
- $5,000 (reduced by the wager or buy-in) from a poker tournament, sweepstakes, jai alai, lotteries and wagering pools.
- $1,500 (reduced by the wager) in keno winnings.
- $1,200 (not reduced by the wager) from slot machines or bingo
- $600 (reduced by the wager at the casino's discretion) for all other types of winnings but only if the payout is at least 300 times your wager.
Win at or above these amounts, and the casino will send you IRS Form W2-G to report the full amount won and the amount of tax withholding if any. You will need this form to prepare your tax return.
Understand that you must report all gambling winnings to the IRS, not just those listed above. It just means that you don't have to fill out Form W2-G for other winnings. Income from table games, such as craps, roulette, blackjack and baccarat, do not require a WG-2, for example, regardless of the amount won. It's not clear why the IRS has differentiated it this way, but those are the rules. However, you still have to report the income from these games.
What is the Federal Gambling Tax Rate?
Standard federal tax withholding applies to winnings of $5,000 or more from:
- Wagering pools (this does not include poker tournaments).
- Other gambling transactions where the winnings are at least 300 times the amount wagered.
If you win above the threshold from these types of games, the casino automatically withholds 24 percent of your winnings for the IRS before it pays you. If you cannot provide a Social Security number, the casino will make a 'backup withholding.' A backup withholding is also applied at the rate of 24 percent, only now it includes all your gambling winnings from slot machines, keno, bingo, poker tournaments and more. This money gets passed directly to the IRS and credited against your final tax bill. Before December 31, 2017, the standard withholding rate was 25 percent and the backup rate was 28 percent.
The $5,000 threshold applies to net winnings, meaning you deduct the amount of your wager or buy-in. For example, if you won $5,500 on the poker tables but had to buy in to the game for $1,000, then you would not be subject to the minimum withholding threshold.
It's important to understand that withholding is an entirely separate requirement from reporting the winning on Form WG-2. Just because your gambling winning is reported on Form WG-2 does not automatically require a withholding for federal income taxes.
Can You Deduct Gambling Losses?
If you itemize your deductions on Schedule A, then you can also deduct gambling losses but only up to the amount of the winnings shown on your tax return. So, if you won $5,000 on the blackjack table, you could only deduct $5,000 worth of losing bets, not the $6,000 you actually lost on gambling wagers during the tax year. And you cannot carry your losses from year to year.
Percentage Of Winning Blackjack
The IRS recommends that you keep a gambling log or spreadsheet showing all your wins and losses. The log should contain the date of the gambling activity, type of activity, name and address of the casino, amount of winnings and losses, and the names of other people there with you as part of the wagering pool. Be sure to keep all tickets, receipts and statements if you're going to claim gambling losses as the IRS may call for evidence in support of your claim.
What About State Withholding Tax on Gambling Winnings?
There are good states for gamblers and bad states for gamblers. If you're going to 'lose the shirt off your back,' you might as well do it in a 'good' gambling state like Nevada, which has no state tax on gambling winnings. The 'bad' states tax your gambling winnings either as a flat percentage of the amount won or by ramping up the percentage owed depending on how much you won.
Each state has different rules. In Maryland, for example, you must report winnings between $500 and $5,000 within 60 days and pay state income taxes within that time frame; you report winnings under $500 on your annual state tax return and winnings over $5,000 are subject to withholding by the casino due to state taxes. Personal tax rates begin at 2 percent and increase to a maximum of 5.75 percent in 2018. In Iowa, there's an automatic 5 percent withholding for state income tax purposes whenever federal taxes are withheld.
State taxes are due in the state you won the income and different rules may apply to players from out of state. The casino should be clued in on the state's withholding laws. Speak to them if you're not clear why the payout is less than you expect.
How to Report Taxes on Casino Winnings
You should receive all of your W2-Gs by January 31 and you'll need these forms to complete your federal and state tax returns. Boxes 1, 4 and 15 are the most important as these show your taxable gambling winnings, federal income taxes withheld and state income taxes withheld, respectively.
You must report the amount specified in Box 1, as well as other gambling income not reported on a W2-G, on the 'other income' line of your IRS Form 1040. This form is being replaced with a simpler form for the 2019 tax season but the reporting requirement remains the same. If your winnings are subject to withholding, you should report the amount in the 'payment' section of your return.
Different rules apply to professional gamblers who gamble full time to earn a livelihood. As a pro gambler, your winnings will be subject to self-employment tax after offsetting gambling losses and after other allowable expenses.
The famous card game known as blackjack has rocked the gambling world for centuries. Surely, people have lost a lot over it, but there were a lot of lucky winners over the years as well. The reality of it all is that probably some of the biggest wins haven’t been made public and will forever remain a secret between the player and the dealer, especially big wins from previous decades when there was no internet, no smartphones and no ever present media.
But just for fun, what are the biggest wins known in blackjack and who were the lucky players? Here are the top five.
No.5: Shoeless Joe
We have a mysterious case of a winner whose identity was never revealed. As is turns out, it was an elderly man known as the Blackjack bum or Shoeless Joe (not related to Chicago White Sox player). He was believed to be kicked out of the house by his wife and was evidently not taking care of his personal hygiene for a while.
He came into the Treasure Island casino in 1995, without any shoes on his feet, and sat at a blackjack table after cashing in his $400 social security check. The man was ignorant to basic blackjack strategy, splitting 10s and doubling down on hard 12s and hard 13s, but that week he managed to win around $1.5 million. However, it must have triggered his unpleasant side, as he became aggressively annoying, which gave casino management reason to rejoice when he finally lost and was thrown out of the casino.
No.4: Ken Uston
Blackjack Hall of Fame member Ken Uston was a complete opposite from our previous winner. Relyig on Edward Thorp’s Beat the Dealer book, he based his play on strategy, rather than pure luck, mastered the mathematical elements of the game and applied them on team play.
He is referred as the creator of blackjack card counting teams, early predecessor of the notorious MIT team.
Between 1975 and 1981, Ken Uston and his team of card counters accumulated winnings resulting in a sum worth more than $4.5 million, running the impressive streak across multiple tables and numerous casino venues across the United States. Check our Blackjack History Infographics for more info.
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No.3: Kerry Packer
Our next contestant is the famous Aussie millionaire Kerry Packer. He was a media magnate, with a reputation of a passionate gambler – and was always considered one of the highest rollers in casinos worldwide. In 1991 he was sitting at a public blackjack table of the Las Vegas Hilton casino. It didn’t take him much to win $7 million for that one night. Apparently, the Hilton had a special private room made for him after that. When he came back the next year, he reportedly gave back $10 million to the casino, but he probably didn’t regret the loss all that much.
No.2: Don Johnson
One of the wins that set on fire the gambling world was certainly Don Johnson’s accomplishment in 2011. No, we are not talking about the famous ‘Nash Bridges’ Don Johnson, but it was also a pretty resourceful man, a CEO of Heritage Development LLC company. He had an unbelievable winning streak from December 2010 to April 2011, earning a total of $15.1 million playing in several major Atlantic City casinos.
The successful blackjack player first won $4.23 million at Caesars Atlantic City, then $998,000 at Borgata Hotel Casino & Spa the same month. After a while, his luck struck again, big time. He won $1.8 million at Borgata again, and in two nights another $2.25 million. And lastly, he won $5.8 million at Tropicana Casino.
Probability Of Winning Blackjack
As he claims, he didn’t count cards apply any other technique. He simply took advantage of every favorable house rule there is, and won more as he played more. According to some interviews, he managed to negotiate a certain discount on his loses in order to keep playing, and it certainly paid off.
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No.1: Kerry Packer
It’s not a mistake. We simply have to mention Kerry Packer once again. Not just because we want to, but because the man has had an extraordinary gambling career.
After becoming a regular at Las Vegas whenever he had time off or was on holiday, he came back for another round in 1995. Packer was reported to have played up to 8 hands simultaneously at multiple blackjack tables at Las Vegas MGM Grand this time. He placed bets of $250,000 per hand, and 20 times in a row there were only winning hands for him.
Within 40 minutes he finished his blackjack session cashing out $20 million. Allegedly, he renounced $1 million in favor of the dealers, leaving it behind as a tip!
The world of blackjack is truly inspirational, wouldn’t you say?