The topic of gaming and taxes has been popular lately, enough so that we’ve established a tag for those looking to dive deeper. Today’s question explores the idea of a reportable handpay jackpot vs. overall wins and losses for a day.
If I lose 10k on a machine then it pays an 8k jackpot, I’ve lost 2k still, it’s not a win. I pay tax on the 8k jackpot still?
Ross N.
Paying taxes, and having wins reported, are in two separate buckets. Casinos are required to report when any player wins $1,200 or more on an electronic machine like a slot, no matter what the bet level is. So, for example, a player betting $1,000 and wins $1,500 – that’s reported, even though it’s $500 above the $1,000 bet. That, too, is weird, but is how the rules work today.
So your $8,000 jackpot handpay in this example will get reported to the IRS. You normally are given the choice of having federal taxes taken out or not. For players who routinely get jackpots of that size, the normal decision is to opt out.
The reason is once you get to a certain amount of gambling winnings, and enough losses on the other side, you’ll reach the point where you can itemize your gambling losses as part of the deductions on your tax return (those who claim the standard deduction can’t take advantage of this). So the win will get reported, and all your other wins are supposed to too (you’re reporting ALL winnings, right?), and then you’re able to write off losses up to the amount you won.
As such, if you’re a net loser at the end of the year, you can write off the winnings on your taxes (as long as you can itemize), and not have to pay taxes on that jackpot or any other casino winnings.
Now, it’s important to keep good records of your wins and losses (win/loss statements aren’t enough, the IRS states on their own website), since if the IRS ever chooses to audit you, you have to back up proof of your wins and losses.
But ultimately, all wins that meet the jackpot handpay threshold are reported. Whether you owe taxes simply comes down to what your individual tax situation will be for the year.
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