You may have already taken the leap and tried your luck at a casino, either in person or online. Online casinos and sportsbooks have swept the state. Suppose you’ve been fortunate enough to profit from gambling or lottery operations. In that case, you’ll want to be sure you’re taking care of your tax obligations.
If you’ve won a cash award, it’s considered taxable income, just like if you carried it home from work. It encompasses all forms of monetary gambling, such as slot machines, table games, betting on sports, lotteries, poker tournaments, horse racing, and others. If you leave the casino with non-cash wins such as autos or vacation deals, you will be taxed at their actual market value.
Remember, tax professionals do that for a living. You’re probably right if you think you’ll need a tax professional or a CPA to help you with this.
In Pennsylvania, are Gambling Winnings Taxable?
Gambling winnings are all taxable. It covers earnings from gambling on sports, casino games, slots, parimutuel racing, poker, and the lottery in Pennsylvania. Your online casino, sportsbook, or poker site might have already withheld federal tax based on the amount of your winnings, which will be noted on a W-2G form issued to you and submitted to the Internal Revenue Service.
Even if you did not obtain a W-2G form and the casino operator failed to withhold taxes, you must record all gambling earnings on your tax returns.
In addition to the federal tax, Pennsylvania levies a personal income tax on gaming winnings.
Are Gambling Bonuses Taxable?
Gambling income comprises any gains gained through promotions; thus, keeping correct records is critical. The fair market value of free spins, credits, or products is treated as income, just like a cash award. If you wager on sports, some of those promotions might be really beneficial, so keep an eye out for them and make a note of them on your return.
How Much Do I Have to Pay in Taxes on My Gaming Winnings?
Casinos withhold 25% of earnings if a Social Security number is provided. If you do not disclose your Social Security number, the payer may deduct 28% of your compensation.
Pennsylvania’s personal income tax is currently a flat 3.07% rate that covers all taxable income, even gaming and lottery earnings. Pennsylvania has the lowest flat tax rate of any state.
The New Rate of Regular Withholding
The withholding rate under Section 3402(q) applicable to prizes of $5,000 or more from sweepstakes, wagering pools, some parimutuel pools, jai alai, and lotteries (previously 25%) is now 24% for taxable years beginning after December 31, 2017.
Certain Gambling Winnings (Federal Form W-2G)
The institution that pays the wins, in most cases the casino, is liable for mailing Form W-2G, Certain Gambling wins, to the beneficiary of the funds.
The value of winnings is reported on Form W-2G to both you and the IRS. The payer is only needed to provide Form W2G if the winner meets the following criteria:
- The gains from a bingo game or slot machine that are not reduced by the amount bet are $1,200 or more.
- From a keno game, the profits less the bet are $1,500 or more.
- After deducting the wager or buy-in, the earnings from a poker event exceed $5,000.
- Except for bingo, slot machines, and keno, along with poker tournaments, the earnings are decreased by the wager as follows:
- $600 or more, plus;
- A minimum of 300 times the wager amount
- The winnings are subject to either ordinary gambling withholding or backup withholding under federal income tax law.
How to Report Gambling Winnings in Pennsylvania
So, suppose your gaming earnings exceed specific monetary levels. In that case, the W-2G should arrive in the mail around the end of January. When filing your federal taxes, fill out Form 1040, Schedule 1, Line 8, with the entire amount of your winnings (including non-cash rewards). For state reporting, divide the earnings on PA-40, line 8, Schedule T. If you’re a Pennsylvania resident and won out of state, the winnings are still due to Pennsylvania state taxes.
What Happens If I Don’t Get a W-2G in Pennsylvania?
Even if you do not get the form W-2G via mail, you must still declare any gambling and lottery profits. While gambling is enjoyable, underreporting your taxable income is perilous. There’s no need to keep your gambling earnings off your Form 1040 and PA-40 state income tax returns if online operators include a part of your account where you may look up your wins and losses.
Can I Claim Gambling Losses?
Now for the good news. There are a few points to keep in mind while deducting gaming losses. To begin with, the losses you remove are determined by your winnings. If you won $ 1,500 but lost $6000, you are limited to deducting the $ 1,500 you won. Furthermore, you can deduct gambling losses only if you categorize your deductions. Again, record-keeping is essential. You may be requested to give proof of your losses, so make sure you’re prepared with the following:
- Form W-2G from whoever sent you one.
- Receipts from casinos, racetracks, and other physical gambling establishments.
- Bet slips and payment slips containing the date and kind of wagers, as well as the location and amount earned or lost.
Lottery Winnings Taxes in Pennsylvania
Lottery wins in Pennsylvania are also taxable income. If you win more than $600, you’ll receive a W-2G form; if you win more than $5,000, the PA Lottery will withhold that amount for you automatically.
In Pennsylvania, how are group lottery winnings taxed?
You’re still on the line if you and your coworkers won a big lottery jackpot and divided it. When the prized ticket is cashed, the person who gets the proceeds must complete IRS Form 5474, which specifies how much money the organization has won in the lottery.
If the person who wins fills out the form, they will include all of the other winners’ tax information, such as their Taxpayer Identification Number (ITIN). When this form is submitted, everyone in the group receives a W-2G Form, and the IRS receives its cut.
Taxation of Multi-State Lottery Winnings
Multi-state lottery wins, such as Mega Millions or Powerball, are taxed in the same way as any other. And, because the Pennsylvania State Lottery granted the prize money, it qualifies as Pennsylvania source income if the ticket was bought in the Keystone State. Suppose you participated in a group lottery pool with others from out of state. In that case, you and other nonresidents are both due to Pennsylvania state taxes.
What Happens If I Don’t Report My Winnings From Gambling?
With additional fines and interest charges, your tax bill might skyrocket. Remember that if you received a winnings statement on Form W-2G, the Internal Revenue Service also has a copy. If you do not disclose your winnings, the IRS may require you to do so or add penalties and interest to your tax bill.