When you win a jackpot handpay at a casino, they’ll often ask you if you want taxes taken out, and if so how much. What’s the best move:
When claiming a jackpot is it better to have taxes taken out or not?
Jane Y.
Forgive us for being a broken record here, but before we get into any tax advice, please remember we are not accountants, and we recommend any official tax advice be sourced through them.
The reason why, shifting to our answer, is each person’s tax situation is different, and because we don’t know anything else about you or your life, which can impact whether taking taxes out makes sense.
The safest thing you can do is to take taxes out. The amount of the taxes you should have withheld depends on your tax bracket. Whatever the highest tax bracket you hit for your primary income would generally be is the right percentage, so if you know that, great! If not, targeting a reasonable amount so you’re not caught owing can reduce challenges at tax time. (The tech may be able to give you a default number – in the past they have for us when asking.)
Meanwhile, some of you may be saying “why take taxes out, when you can write off your wins?” Well, because it’s not that simple, as we’ve explained in this article. That’s why it’s safer – if you’re unsure, overpaying at least avoids a bill at the end of the year, even if you’ve effectively given the government a free loan.
If you know you will be itemizing on your taxes already, which lets you write off your wins with losses, or get enough jackpots to hit that threshold already, then the answer may be different, but we find, especially with the increase in the standard deduction that took place a few years ago, that many people no longer qualify to itemize their taxes anymore.
Paired with the fact that a lot of people don’t tend to get many jackpots to begin with, and that may be why it’s safer to have the taxes withheld.
And with the potential for the jackpot threshold to finally be raised getting another look, maybe this becomes an issue many of us won’t even have to face.
But ultimately, it’s up to each player to make the best decision based on their own circumstances. If you’re not sure what that is for you, a quick question to the accountant can generally resolve it.
Have a question? Submit yours here!
In Ohio, you do not have a choice. On slot wins, you pay taxes right then & there. No one asks how much you want to be taken out or what percentage. If you win over $1200, they take your slot card, driver’s license & Social Security number. You are asked how you want your winnings (check, cash, or both). After about 20 minutes, you are given a receipt. Don’t just shove it in your pocket. My husband did & when we got home, we discovered they had listed his S.S.# incorrectly.
Thanks for this insight, Lynette, and it’s a helpful reminder that state regulations can sometimes take precedence, just like some states require state taxes to be paid on taxes too.
Actually, Lynette, it’s only state and local taxes that are mandatory. The fed taxes can still be deferred.
Thanks Brad for that clarification! That makes a lot of sense!
Hi Brian,
I know you cruise a lot and we just got off a cruise to the Carribean. My hubby won 2 jackpot handpays and I won one. ( Yay Us ) They do not take out taxes on the cruise line we were on. ( NCL) My question is when in International Waters why would you have US taxes to pay? Or do you? Just wondering so we can be informed for our 2024 taxes.
Thank you in Advance.
Hey Sally – check out our answer to your question here:
https://fliptheswitch.com/why-are-cruise-ship-jackpots-in-international-waters-taxable/