In the legendary Beatles hit song The Taxman, one line suggests “be thankful I don’t take it all.” When it comes to taxing gambling winnings in the USA, you’ll be giving a fair share to the IRS. But they won’t be taking it all, and they won’t be taking anything at all if you stay below the magic number.
$600 – The Magic Number for Tax-Free Winnings
That magic number in terms of gambling winnings is $600. Up until you hit that limit, you get to keep all of your winnings. It doesn’t matter how you won the money as long as the amount won doesn’t exceed $600.
In fact, it is the legal responsibility of the online casino to report any winnings over this amount to the IRS.
However, $600 isn’t an all-encompassing barrier. It does count as the cutoff for table games such as blackjack. Still, there are different levels of winnings that you must go over on the various online casino games before you get into tax-paying territory.
For instance, if you’re playing the slot machines at the Borgata casino, you can win up to $1,200 before it gets reported to the IRS.
That $1,200 number is also the maximum you can win playing online bingo before the taxman comes calling. Should you be playing keno at Caesars Palace, the pre-tax limit is $1,500. If you sidle up to the poker table at BetMGM casino, you can bank as much as $5,000 from a single tournament prior to the money being taxed.
Should you hit a fairly massive win, the IRS will require that the casino hold back a percentage of the winnings for taxation purposes. On a $5,000 jackpot win, for example, the online casino must retain 24% of those funds for taxes.
If you are a gambler who wins big, you’ll need to report your total gambling winnings for the year on Line 21 of Form 1040 of your personal income tax return. There is some good news here, though, and how rare it is to get good news when the IRS is involved in the equation.
On Line 21, Schedule A of Form 1040, you are able to deduct all of your gambling losses for the year from your gambling winnings. However, you’ve got to be able to prove it. So, keep all records of transactions between you and the casino, such as bank statements, losing betting tickets and other receipts to make use of at tax time.
Those losses could turn into a benefit if you ultimately end up hitting it big at the online casino.