Some people try to figure out the way to minimize their expenses and maximize their wins when they hit something exceptional, like a jackpot:
I’ve always wondered about a way around paying taxes in Vegas. If I own a house in the States (Arizona) and I have a state ID card why couldn’t I use that with say my US bank card to avoid paying taxes?
Shawn H.
Presuming you’re a U.S. resident, there’s generally three things that factor into taxes:
- The state in which you win the jackpot (here we presume Nevada)
- The state in which you live (presume Arizona, but your question leaves ambiguity)
- Federal taxes, which everyone who’s a U.S. resident will contend with.
So if you’re a U.S. resident, the first question won’t change, because Nevada doesn’t charge gamblers an income tax because they don’t have one at all. Then it’s a question of whether Arizona would require you to file that as income and tax you on it. We’re not accountants or experts on each state’s tax situations, so that’s a good question for an accountant. (And as always, this is information and should not be construed as tax advice.)
But regardless of whether you’re a resident or not in the U.S., any income generated on gambling in the U.S. is considered taxable income. Jackpots of $1,200 or more will be reported to the IRS, meaning if you don’t file a tax return, they’ll know, and based on recent reporting, that low hanging fruit scenario is one place the IRS is planning to focus their audits on.
So it doesn’t matter what state you’re a resident in when it comes to that, as it’s still a U.S. resident filing a U.S. tax return.
Now, if you’re not a U.S. resident, trying to figure your way around taxes, that doesn’t work either, because you’d have to file here and it counts as income. Some countries have treaties that govern how taxable winnings work, and some residents in some countries can have the taxes removed if they have certain things in place (like an ITIN in which to have their winnings linked).
Again, we’re not accountants, and these rules also change over time, and also differ by each person’s situation, so we recommend checking with an account for the latest information for your specific circumstances.
But hopefully, even this high-level info helps underscore that you in most cases can’t dodge the reporting of this as income and the taxes that come with that, even if you’re a resident in another state, because of the federal level taxes that all of us who hit jackpots have to contend with. And while there are ways to deduct gambling winnings with losses, not everyone qualifies for this either.
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