Gambling Winnings Taxed At What Rate

The tax rate deductible from your winnings is still the same irrespective of the amount you win. So it doesn't matter if you earn $2,000 or $400,000 because betting taxes are not progressive. In some cases, the tax (25%) is already deducted by the casino before you are paid your winning. In Kenya, bookies pay 7.5% tax on all winnings they record. In 2017, Kenya upped their tax percentage rate to 35% with hopes of helping young people pursue career choices other than gambling. Meanwhile, Cambodia has lowered its tax rate drastically in a bid to encourage new businesses to invest in its gambling industry. Gambling Tax-Free Countries. Sports betting winnings are subject to the same 24% federal tax rate as other gambling winnings. The winners are also responsible for paying the applicable local taxes. The current NJ tax rate is 8.5% for retail sportsbook wins and 13% for wins at online sportsbooks or on mobile apps. California taxes gambling wins as normal income. It collects anywhere from 1% to 13.3% of your winnings. The 13.3% is the highest state tax rate in the US. What is the tax rate on gambling winnings? The majority ofgambling winningsare taxed at a flat 25 percent rate. If you win more than $5,000, your income tax rate may be used to assess taxes against your gambling winnings. You must report all winnings on a 1040 when you receive a Form W-2G from the institution issuing the payment.

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This article was fact-checked by our editors and Jennifer Samuel, senior product specialist for Credit Karma Tax®.

Gambling may just be a hobby to you, but there's nothing casual about it when it comes to filing your federal income taxes.

Nearly two-thirds of Americans gamble, according to a 2016 Gallup poll. And while you might think that winning a few bucks from a scratch ticket or a weekend trip to Vegas isn't a big deal, the government considers every dollar you win from gambling as taxable income.

As a result, it's important to understand how to report your gambling winnings, what to include and how you can use your losses in your favor. Here are some things you should know about how gambling winnings are taxed.

1. You must report all your winnings

Depending on how much you won during the year, you may receive a Form W-2G listing your gambling winnings. But even if you don't receive the form, you're still required to report all your winnings as 'other income' on your tax return.

'All cash and non-cash gambling winnings are taxable and should be reported as ‘other income,' ' says Patrick Leddy, partner at Farmand, Farmand & Farmand LLP. This includes any winnings you received from casinos, lotteries, raffles or horse races. Non-cash winnings, such as prizes like cars or trips, are also considered taxable income and are taxed based on their fair market value.

To make sure you keep track of both your winnings and losses, record the following details every time you gamble:

• The date and type of your gamble or gambling activity
• The name and location of the gambling establishment
• Names of other people who were with you, if applicable
• How much you won or lost
• Related receipts, bank statements and payment slips

2. You can deduct some losses

No one likes to talk about how much money they lost gambling. But when it comes to your tax return, being honest can save you money. That's because the IRS allows you to deduct gambling losses.

Though you may not be able to deduct all your losses.

'Taxpayers can deduct gambling losses only up to the amount of their gambling winnings,' says Leddy, 'and only if they itemize their deductions.'

For example, if your gambling winnings totaled $5,000 in the tax year, but you lost $6,000, you can only deduct $5,000 of those losses. Keep in mind, itemizing your deductions may not afford you the maximum tax benefit. If your total itemized deductions — which can also include charitable donations, home mortgage interest and medical expenses — don't exceed your standard deduction, itemizing might not be the optimum choice for you.

Can I deduct the cost of a gambling addiction recovery program?

IRS Publication 502 lists alcohol and drug-related addiction-recovery programs as eligible for the medical expense deduction. However, gambling addiction isn't included. Yakuza kiwami 2 1000 poker chips online. If you need help dealing with a gambling addiction, you can call the Substance Abuse and Mental Health Service Administration's 24/7, 365-days-a-year hotline at 1-800-662-4357.

3. Even illegal gambling winnings are taxable

According to the American Gaming Association, it's estimated that Americans spend more than $150 billion per year on illegal U.S. sports betting — and yes, that can include your office March Madness pool.

A May 2018 U.S. Supreme Court ruling opened the door for states to legalize sports betting, but not all have done so. That said, any winnings you receive from betting on sports legally or illegally (or from any illegal activity, for that matter) are still taxable.

Bottom line

So how are gambling winnings taxed? Every dollar you win from gambling, whether legally or not, is considered taxable income. As a result, it's critical that you keep a record of your winnings so that you can report them accurately. You'll also want to keep track of your losses so that you can use them to qualify for a tax break.

Once you're ready to file your taxes, Credit Karma Tax® can help show you where to include both your winnings and your losses so that you can maximize your tax refund if you're owed one.

Jennifer Samuel, senior tax product specialist for Credit Karma Tax®, has more than a decade of experience in the tax preparation industry, including work as a tax analyst and tax preparation professional. She holds a bachelor's degree in accounting from Saint Leo University. You can find her on LinkedIn.

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