Do You Have to Pay Taxes on Slot Machine Winnings?
We all love to read stories about big wins and imagine ourselves in the shoes of those winners. But, have you ever thought about what happens at that very moment after successfully beating the slot machine? Usually, the slot machine locks up and, in most cases, you hear the music and see the flashing lights on top of the machine. But one of the first questions every player asks is whether they have to pay taxes on casino winnings? Well, you’re about to find out!
Taxes on Slot Machine Winnings in USA
In the USA, when a lucky player hits a jackpot, there’s the option of receiving the winnings in cash or check. In case it’s a large sum, it’s usually paid by check. However, the IRS only obliges the casinos to report winnings that are larger than $1,200. Of course, all winners are obliged to show a proper identification— a valid ID or passport. When the casino checks for your identification they also look at your age to make sure you are officially and legally old enough to play. As the minimum legal age for gambling varies from state to state, be sure to check it out before you decide to play.
Do I Have to Report All Winnings?
All gambling winnings received from slot machines are subject to federal taxes, and both cash and non-cash winnings (like a car or a vacation) are fully taxable. Apart from slot machines, the same applies to winnings from lottery, bingo, keno, poker or other games of chance. So, if the amount won on a slot machine is higher than $1200, the casino is required to report it. In other words, all your gambling winnings have to be reported on your tax return as "other income" on Schedule 1 (Form 1040), line 8.
Slot Machine Winnings in W-2G Form
In case it happens to you and you snag that big win (which we hope one day you will), it’s useful to know that casino or other payer must give you a W-2G Form, listing your name, address and Social Security number. So, if the winnings are reported through a W-2G Form, federal taxes will be withheld at a rate of 25%. If, however, you didn’t provide your Social Security number (or your Tax Identification Number), in that case the withholding will be 28%. Either way, a copy of your Form W-2G should be issued, showing the amount you won alongside the amount of tax withheld. One copy needs to go to the IRS, as well. Aside from slot winnings, Form W-2G is issued to winners of the following types of gambling activities like:
bingo (for players who win $1,200 or more),
keno (for at least $1,500 worth wins)
poker tournament players (for the $5,000 win or more).
a horse track (if the winnings are 300x your bet)
However, not all gambling winnings are subject to IRS Form W2-G. For instance, W2-G forms are not required for winnings from table games like blackjack, baccarat, and roulette, whatever the amount. You’d still have to report your winnings to the IRS, it’s just you won’t need to do it through W-2G Form.
Are My Slot Losses Deductible?
The good news is that you can deduct your slot losses (line 28 of Schedule A, Form 1040), while the bad news is gambling losses are deductible only up to the amount of your wins. In other words, you can use your losses to compensate for your winnings. So, let’s say you won $200 on one bet, but you lost $400 on one or a few others, you can only deduct the first $200 of losses. Meaning if you didn’t win anything for a year, you won’t be able to deduct any of your gambling losses. In order to prove your losses, you need to keep good records and have suitable documents. So, whenever you lose, keep those losing tickets, cancelled checks and credit slips. Your documentation must include the amount you won or lost, a date and time, type of wager, type of your gambling activity, name of each casino/address of each casino you visited and the location of their gambling business. You may as well list the people who were with you.
Do State and Local Taxes Apply Separately?
Yes, you are required to pay your state or local taxes on your gambling winnings. In case you travel to another state, and snag some huge winning combo there, that other state would want to tax your winnings too. But don’t worry, you won't be taxed twice, as the state where you reside needs to give you a tax credit for the taxes you pay to that other state. Keep in mind though that some states like Connecticut, Massachusetts, and Ohio don't allow gambling losses.
Online Slot Taxes
Whether you usually spin the reels of your favourite casino games in land-based casinos in the US, overseas casinos, or online casinos, all income for the citizens of the US is taxable. As a US citizen, you are required to send Form W2G for all winnings from a slot machine (not reduced by the wager) that equals to or is more than $1,200.
Taxes on Slot Machine Winnings in UK
As a resident of the United Kingdom, your gambling winnings won’t be taxed. Unlike the USA mentioned above, you’ll be allowed to keep whatever it is that you have won and earned in Britain, even in case you are a poker pro. Then again, you won’t be able to deduct any losses you might collect. It doesn’t really matter if you win £5 or £5 million playing online slots, your winnings will be tax-free as long as you reside anywhere in the UK, be that in England, Wales, Northern Ireland or Scotland.
Taxes on Slot Machine Winnings in Canada
If you are a recreational player who lives in Canada, we have good news for you. When it comes to gambling, you don't have to pay taxes as your winnings are totally tax free. According to laws in Canada, gambling activities don’t fall under the category of constant source of income, therefore your winnings will not be taxed. Canadians don't even pay taxes on their lottery winnings. The only exception here are professional gamblers who make a living from betting and are, therefore, obliged to pay taxes. Keep in mind though, this is the current situation - laws in Canada change frequently, which may also include tax laws.
Taxes on Slot Machine Winnings in Australia
In case you reside in Australia and like to visit casinos from time to time, you’ll be happy to find out that your winnings in Australia will not taxed and here are 3 core reasons for that:
Gambling is not treated a profession (it's treated as a hobby)
The government doesn’t see profits from gambling activities as income, but as a result of good luck
The Australian government taxes casino operators and lottery organisers instead.
Of course, taxation varies from state to state.
Taxes on Slot Machine Winnings in New Zealand
Unlike in Australia, where even professional players can claim they are recreational, in New Zealand slot machine winnings (and any other winnings from casino games) are considered taxable income, in case the player has little income from other resources. But, apart from professional gambling, it is very unusual for winnings to be taxed in New Zealand. Most often, gambling is considered recreational and not income, so players can enjoy their gameplay as they do not have to pay taxes on their winnings.
Here’s my background: -male, 34 years old living in Canada since 2014 and PR since 2017-18 -born and brought up in Philippines -while doing my bachelors in my home country, I used to play a lot of online pokeblackjack and won in the neighbourhood of high 5 figures (USD) but wasn’t sure if I could withdraw it there without problems because of gambling being a grey area -moved to Canada in 2014 to do my masters that I finished in 2015 -also managed to withdraw above money to my Canadian bank accounts in small increments during this period During my masters, I started playing live at casinos here and really fell in love with the lifestyle and the freedom to visit my home country every year for a few months to look after my ailing mother, to the extent I never bothered finding a 9 to 5 after getting my 3 year work permit (2015-2018). However, I did work part-time for around 6 months in 2017 and got my PR in 2018. I also worked part time for around 5-6 months in 2019. With salary around $6-8k each in both years. I also played a lot of poker and blackjack at the casino during all these years during which I made: 2015-$8k 2016-$5k 2017-$35k 2018-$49k 2019-$35k I started filing my taxes around 2018, and consulted with a few tax professionals, all of whom suggested that the above qualifies as casual gambling income (not conducted as a business), and to report only my part-time job income as per T4 slips. They did mention that it is a very grey area whether the activity is taken for the pursuit of profit or not and hence taxable or not, but the CRA would consider the amounts too small and the topic too controversial to litigate as taxing gambling profits could mean allowing gambling deductions for everyone. And at worst, I could be asked to pay taxes on these winnings in the future. Besides, I live a very basic life (no cahouse) and my only expenses are rent ($1k) and groceries. I also intend to find another job once COVID ends. Over these years, I’ve never bothered to invest my money (that has been lying in a zero interest savings account) which I’ve realized has been a big mistake since I’ve seen my bank balance stay stagnant or trickle down. However, I still do have the high 5 figures (thanks to the money I won prior to moving to Canada) that I wish to start investing now, using something like Wealthsimple. I came across something called TFSA and was advised to start with that (since my total contribution room accumulated over the years would be almost $50k) but since that is an account registered with the CRA, I’m not sure if it would be prudent to put a large sum of money into that? Can the CRA come up to me and ask where I got the 50k from since it doesn’t reflect in my tax returns? I don’t have a problem even if that happened, but just curious if they indeed monitor TFSAs and match it with your income or not. If so, should I consider investing in non-TFSA related funds? Thank you for the suggestions in advance.
Niagara Falls has changed things up since I was last there. There are 2 casinos, Fallsview and Casino Niagara, and they used to each have a poker room. Niagara had 1/2, 2/5 and probably on up, I don't know because I am a low-stakes player. Fallsview had went up from 2/5. Fallsview no longer offers Poker, only Casino Niagara. They have moved their tables to a newly constructed room. The old room was in the lower level, but open to the rest of the casino, where the bings and bongs of the slots were part of the soundtrack. The new room is off to the back, has 26 nice, new tables, comfy chairs, and is walled off from the bustle of the casino floor. Limit runs 3/6 to 50/100, and NLHE is 1/3 to 50/100. There are also some Omaha, I think. Buy-in is maxed at 100BB. One big difference is that they have disposed of the rake. Instead, every 30 minutes there is a dealer swap, and everyone throws in a $6 "seating charge". So it's $12/hr to play a rakeless table. There is a pull for the BBJ. Speaking of the BBJ, it's 50/25/25, and according to the rules, a full house of Aces over Queens or better, must be beat by a higher full house, Quads, or Straight Flush. Both hole cards must play. Right now it's running at a shade over 100K CDN. Keep in mind that in Canada, gambling winnings are not taxable. As far as play is concerned, there was lots of action, but none of it went my way. The players seemed to know their stuff, and were nowhere near as loose as I had hoped. There were some 100-200BB pots, but I wasn't in 'em. I think Niagara might not be as loose as some other places, as there are something like 7 million people in the Greater Toronto area, and this is the only casino within the 2 hour drive. As well, there were some out-of-towners, one from Texas and one from London at the table. Shitty variance day. Had an OESD + 4 to the flush coolered at the river. One hand I had AQo, flop A84, turn A, called the guy all-in, and the motherfucker flips over pocket 8's. One hand I had the nut flush, bet 10BB into a 5BB pot and got ONE caller. Oooooo, a whole $42 payout for the nuts. It was just not my night. Stupid shit like folding 46 pre and seeing a 664 flop. Lady Luck was spitting in my eye at times. Eventually I busted out and headed home. That's poker. I wasn't bringing money I couldn't afford to lose, I enjoyed my time there, the table was pretty sociable, and I had a good time. I actually had more money in my budget for the night, but the way things were running for me, I decided not to rebuy. Knowing when to pull the plug is a skill I am still learning. I've gone from "Where's the fucking ATM?" to "That's poker. Have a good night, gents." Have a good night, gents. EDIT: Sorry, there are other casinos within 2 hours of Toronto. There's Rama, with 10 tables, Brantford with 14, and Blue Heron with 7, but those numbers might not be accurate. EDIT 2: If you are thinking of visiting, competition for the tourist dollar is substantial, and the off-season is coming up. Shop around, there are some really nice hotels, suites overlooking the Falls, that can be had in the $100 range mid-week, maybe a little more on the weekends.
So.. we in Canada have capital gains tax, obviously. Ok, that's fine. How do you report coins you've won through gambling? In Canada, gambling winnings aren't taxable... If for example: I had five LTC. I gamble 4 LTC and lose them. I gamble my last LTC and leave the casino with 25 LTC. How are you supposed to report that? Are you? This is going to get complicated.
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