Few things are more disheartening than giving some of your hard-earned cash over to Uncle Sam in taxes, yet adhering to gambling laws from the start will save a great deal of hassle down the line. This article explains how much taxes must be paid on slot machine winnings as well as what documents need to be submitted with reporting them.
the IRS typically requires casinos to report winnings of more than $1,200 from slot or video poker machines and games of chance such as bingo and keno; any prizes exceeding $5,000 at games of skill such as poker tournaments; these reports typically come in the form of W-2G forms which include your name, address and Social Security number; however winnings under that threshold do not need to be withheld from them.
The amount withheld from winnings depends on your tax bracket. The standard withholding rate is 24%; however, this could change if you didn’t provide the casino with your tax ID number or fall into a higher tax bracket than expected. Afterward, you’ll receive a W-2G form detailing both how much was won as well as any withholding amounts taken out by them to satisfy federal income tax liability.
As well as federal taxes, gambling taxes vary between states and local jurisdictions; state rates often trail federal rates significantly. You can use an online gambling tax calculator to find out exactly which rates apply in your jurisdiction. Furthermore, keep detailed records of your gambling activities, both wins and losses, so that when it comes time to file your tax return you can include gambling earnings while deducting losses as necessary.
While it might be tempting to gamble away your slot machine winnings before the IRS takes their cut, that wouldn’t be wise. Instead, the best way to protect them would be to comply with federal and state gambling laws from the beginning; failing which, you could incur severe penalties for noncompliance.
TaxAct’s user-friendly software will guide you step-by-step through the filing of gambling winnings with TaxAct, making the process easy and secure. Just keep accurate records of all your gambling activity – both winnings and losses – to claim any deductions applicable to you. We wish you good luck!