(NEXSTAR) — Tax season is back, which means it’s once again time to report your income for the previous year.
That includes all your income, whether it’s from a W-2, a side gig, illegal activity (yes, you have to report that), and potentially a new source of income for some: gambling winnings.
Gamblers new and experienced seemingly had a strong year in 2023. Commercial casinos across the U.S. saw their best year, winning $66.5 billion from gamblers, according to the American Gaming Association.
When revenue figures from tribal-owned casinos are released separately later this year, they are expected to show that overall casino gambling brought in close to $110 billion to U.S. casino operators in 2023.
“From the traditional casino experience to online options, American adults’ demand for gaming is at an all-time high,” said Bill Miller, the association’s president and CEO.
Many states are only now getting into legal gambling, which helped to fuel that success.
If you’re among those who put down their first bets in 2023, you’ll have to report it on your taxes: even if you lost.
When do you have to report gambling wins?
Gambling winnings are considered income — technically, “other income” — on state and federal tax returns, Mark Steber, chief tax information officer for Jackson Hewitt Tax Services, told Nexstar. You have to pay tax on all of your winnings, big or small.
The type of gambling, the amount you won, and, generally, the ratio of winnings to the wager will impact reporting and withholding on your taxes, the IRS explains. You should receive a W-2G if you won $1,200 or more playing bingo or slots at a casino, for example, or if you won more than $5,000 in a poker tournament.
“Even if taxpayers use sports betting organizations and don’t receive a W-2G, but have winnings, they are responsible for reporting that income on their tax return,” Steber said. “Examples of ‘other income’ include, but are not limited to, money won from casinos, game shows, raffles and state lotteries. Winnings from foreign countries, including international gambling are also taxable and must be reported on federal tax returns.”
As Steber mentions, even your lottery winnings are subject to taxes. When your payout is large enough, the IRS will automatically withhold 24% of your winnings (your state will also withhold a portion for taxes unless you live in a state without a local lottery tax), but because the highest federal tax rate is 37%, you may still owe taxes on your jackpot.
What about gambling losses?
You can’t cut down your gambling winnings with your losses, either.
But you can deduct losses up to the winning amount on your tax return.
“Keep in mind, the standard deduction amount is very high, and most people don’t qualify. So, if you take the standard deduction and don’t itemize, you cannot deduct your losses,” Jackson Hewitt explains.
Owe taxes but can’t pay?
Tax experts recommend filing your taxes early, regardless of whether or not you’ll owe money.
The IRS can penalize you for failing to file as well as for failing to pay the taxes you owe on time. Taxes you owe are subject to interest and monthly late payment penalties, according to the IRS.
If you can’t pay the amount you owe, the IRS recommends paying what you can and exploring payment options, which include short-term and long-term payment plans.
The tax filing deadline falls on April 15 this year.
If you don’t get a refund this year, you may be in line for one next year. In November, the IRS announced inflation adjustments to the tax code, including changes to the standard deduction and individual income brackets. The standard deduction is a dollar amount that reduces the amount of income that is taxable.
Those took effect as we rang in 2024 and will apply to tax returns we file in 2025. The changes could already be reflected in your paycheck this year, though.
The Associated Press contributed to this report.