Do Online Casinos Report Your Winnings to the IRS?

Legal online casinos are slowly emerging across the US. Thanks to law changes, they are catching up with the popularity of online sports betting. Whilst winning big is the ultimate dream, most of us are happy to reap those smaller regular wins with PayGamble’s casinos.

But what happens when it comes to April, and it’s Tax Day? Do these wins count, and should you declare them? There’s no getting around this, unfortunately. Regulated and legal online casinos in the US do report some of your winnings. But ultimately, you are responsible for declaring everything you have won from gambling, no matter how and where you won it.

How are Online Casino Winnings Taxed?

If you win big from any legal online casino, then the payer will minus 24% of the total for tax purposes. They should also issue you a copy of the W-2G IRS form to note down the transaction and officially record it. Big wins are classed differently, depending on the game type they were generated.

Slot machines, video poker, and bingo are $1,200, while keno winnings are over $1,500. The limit to pool betting, lotteries and sweepstakes are $5,000.

For example, the online casino reports a $600+ win from a game of skill like baccarat, and the 24% deduction is made, or if you win 300x your initial wager. It’s not certain why the IRS makes these differentiations, as slots and table games are all forms of gambling. 24% of your total win will be deducted before you receive your winnings by the online casino and sent to the IRS. However, this 24% is only an estimation of the tax due on your winnings.

This amount could be more tax return day, or you may get a rebate.

Do I Have to Pay Tax on my Online Casino Winnings?

In the US, yes, you do. All gambling incomes are taxable, whether from an online casino or getting lucky at the horse race track. When it comes to taxes, it’s always better to be 100% honest with your declarations.

They can audit your accounts even if you believe the government cannot track your winnings at online casinos. If the IRS discovers undeclared income, you’ll pay the tax back, interest, and a fine. You might even be jailed if you have “wilfully evaded paying taxes”.

Are Taxes Payable on Offshore Online Casino Winnings?

If online gambling is banned in your state and you win at an offshore site, then yes, you must declare this to the IRS. Don’t fall into the trap of believing you’ll get away with it if you play at a site based in Europe, for example. The IRS is concerned about taking taxes from your earnings; they aren’t fussed about which country the winnings were generated in.

Can I Deduct Online Casino Losses From my IRS Declaration?

It’s not all bad news. Thankfully, you can deduct losses from your winnings when you make your declaration. But losses more than your overall winnings cannot be classed as a tax write-off. You will need to get hold of Form 1040 or 1040-SR and itemise your deductions on the Schedule A Section.

It’s only possible to do this if you have kept good records of your wins and losses. This means firm evidence, including receipts, statements, tickets etc. You can add your online casino losses to the number of overall wins in the section “Other itemised deductions”.