Gambling and Taxes in the U.S.

Gambling and Taxes in the U.S.

Gambling, the game of chance, is legal in the U.S. Commercial casino gaming revenue reached $41.7 billion in 2018, which is more than Bahrain’s GDP for that year!

Barring Utah and Hawaii, the remaining 48 states of the U.S. allow gambling in some form or another. Even if you were to visit one casino a week, you’d need 19 years to visit each of the 989 casinos across the U.S.

The gambling sector employs 1.8 million people; that’s more than the populations of Washington, D.C., and San Francisco combined.

The IRS is Keeping a Watch

Gambling is big money. Naturally, the IRS is interested.

Whether the game is bingo, raffles, a lottery, or in a casino; whether it occurs on land or at sea or in cyberspace; whether it occurs once or many times; whether it be a loss or a win: Your winnings are taxable.

Tax on Winnings

Remember, all wager winnings are taxable and must be reported.

You can claim your losses by itemizing them on the IRS’ Schedule A form for deductions. You can subtract your gambling losses from your winnings to arrive at the taxable gambling income you need to report. You can also deduct expenses such as travel to the casino. However, these deductions cannot amount to more than your winnings.

The casino may withhold taxes on your winnings and give you a W2G form. This form provides details of the winnings and the amount withheld. Even without the W2G form, you must report your winnings as “Other Income” on a Schedule 1 form.

Non-Cash Winnings

The IRS also taxes non-cash winnings that may include cars, houses, tickets, and travel, among others. These are taxed at fair market value.

Keep Accurate Records

Jean Scott, the co-author of “Tax Help for Gamblers: Poker & Other Casino Games”, advises to keep a record of all your gambling activities. Track every game of chance you play separately and as extensively as possible. It can be in a diary or your electronic gadget of choice. Be sure to keep all related receipts, tickets, and statements handy in case of an IRS audit.

Good to Know

The IRS categorizes gamblers as either recreational or professional gamblers. A professional gambler reports the winnings on Schedule C, while a recreational or casual gambler reports the gambling income as personal income.

Can Non-Residents Gamble?

Of course you can, but your winnings would still be taxed. Some websites report that the federal government refunds the money taxed when non-resident aliens return to their home country. However, these reports are unconfirmed. But what is confirmed is that the state taxes collected on your winnings will not be returned. Not only that, the losses accrued due to gambling cannot be deducted.

If you are a non-resident, you must file a tax return on the Form 1040-NR for non-residents. You may also refer to IRS publications for more information.

Bingo is banned in some U.S. states

In Illinois, Louisiana, Indiana, Michigan, Nevada, Oregon, New York, South Dakota, Wisconsin, and Washington, the game of bingo is banned.

Every state has its own laws that govern gambling. For example, casinos are legal in the U.S. but are banned in some states. Some games of chance are illegal in some states, while in others, they could be permitted. Also, in some cases, the state and a city within that state can have different laws—such as in Washington state, for example.

Be sure to review the laws of the individual state (or states) in which you plan to gamble.

Tribal gaming and commercial gaming

Casinos can be on two venues: Casinos on Native American land, and commercial casinos. Other than the property on which the casino is situated, there is hardly any difference.

Tribal casinos are located on land that Native American tribes have owned for generations. Commercial casinos are situated on lands approved by state legislatures or voters. As far as visitors to these are concerned, there are no federal restrictions. In some cases, there may be state or local restrictions.

Online games and sports betting

Online and sports betting are legal in the U.S. State laws differ, with some even banning this type of betting.

Some unique gambling terms

  • Beard bets on someone’s behalf to hide the real bettor’s identity.
  • A dispute between a player and a dealer is called Beef.
  • The casino cashier is found in the Cage.
  • George is the gambler who tips the dealer.
  • A cheating dealer is a Mechanic.
  • Ace, Jack, Queen or King are Paint.
  • Pigeon is a dim-witted gambler.
  • Scared money is the money gamblers do not want to lose.
  • A big better is a Whale.

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