Taxes may not be the first thing that cross your mind when you are gambling, but unfortunately there is no escape from paying them on your winnings. While the state of Florida will not tax your winnings due to the lack of a state income tax, any gambling income you incur will still be subject to federal taxes.
This guide will cover all the basics Floridians need to know about various gambling tax situations they may encounter, though it is still always best practice to check with a tax professional to ensure everything is handled properly.
The amount of money you pay in gambling taxes is directly related to your total annual income. This calculator will help you determine just how much of your winnings you will actually receive.
With the federal progressive income tax system, you are assigned a marginal tax rate based on the tax bracket you fall into. Because your marginal rate is determined by all of your income sources and not just your salary, gambling winnings can push you into a different tax bracket than usual.
However, your effective tax rate (what you actually pay) can still be different than your marginal rate depending on what kind of deductions you take. All of these factors can make it difficult to keep track of what you owe on winnings in real-time, so it is recommended you save receipts on anything that does not trigger automatic withholding for an easier time come Tax Day.
Gambling winnings are not taxed by the state of the Florida, but the federal government will still tax Florida residents on all gambling winnings. This includes income earned from casino games, slots, poker, lotteries, sportsbooks, racetracks, jai alai, keno, bingo and any other forms of gambling you may participate in.
Some larger winnings will have taxes automatically withheld by the provider/house, meaning you will receive IRS form W-2G. Nonetheless, you are still responsible for reporting all gambling winnings to the IRS even without form W-2G.
As previously stated, Florida has no state income tax so, you will owe the state nothing. Your federal tax rate is based on your yearly income, which includes gambling winnings, adjusted for deductions.
Any wins that trigger a W-2G are withheld at a rate of 24%. However, this may be more or less than you actually pay depending on the rest of your income.
You will receive form W-2G automatically if your gambling winnings hit certain thresholds. A copy of this form will also be sent to the IRS by the party paying out your winnings notifying them of the details of your payment.
If you won money from multiple places, you will receive a W-2G from each one if you won enough. The thresholds that result in form W-2G being sent to you are as follows:
Certain table games like blackjack, craps and roulette do not require operators to issue a W-2G, even if the winnings are substantial, but as with all gambling income you are still responsible for reporting any wins from these games on your taxes. Any winnings that are not in cash, such as trips or vehicles from sweepstakes, are to be reported to the IRS at their fair market value.
To claim smaller wins where a W-2G is not issued on your taxes, simply include them when you are calculating your total annual income.
If you did not receive a W-2G, there is a good chance you did not win enough money from any one operator for automatic withholding to kick in. If you believe you should have received a W-2G and did not, it is best to contact the operator directly to see if there was a mistake on their end.
It is still vital that you maintain a record of your gambling activities for the year in the event that you do not receive a W-2G form. Remember, all gambling winnings are still federally taxable even if they have not prompted automatic withholding and the IRS expects you to have receipts.
You are legally allowed to deduct gambling losses on your federal taxes, but these deductions come with certain stipulations. In order to deduct gambling losses, you must first forego the standard deduction that most taxpayers take and instead take itemized deductions, which often is not worth it because your itemized deductions need to exceed your tax bracket’s standard deduction for you to come out ahead.
The other stipulation is that you can not claim more in losses than you do in winnings, so even if you had $5,000 in losses to $2,000 in winnings you can only claim a loss of $2,000 on your taxes. To claim losses on your taxes, simply use line 16 of IRS form 1040, schedule A and list your losses. This is where your record keeping is critical because the IRS may request documentation from you if you take these deductions.
Just like any other form of gambling in the state, wins in the Florida lottery are subject to federal taxes but no state taxes. However, the withholding process for lottery wins is slightly different than other forms of gambling. You will still receive a W-2G from the Florida Lottery and your win will be reported to the IRS if you win more than $600, but the Florida Lottery will not withhold taxes unless your win is $5000 or greater.
At that point, taxes will be withheld from your winnings at the standard 24% rate, though as previously discussed that may not be the final rate you pay.
If you were part of a group that purchased a winning lottery ticket, there is a special process for informing the federal government. The group needs to choose one person as a leader to record everyone’s personal information and complete IRS form 5754. From there the winnings and W-2G’s will be distributed to everyone in the group, with taxes withheld if applicable.
Multi-state lotteries like Powerball or Mega Millions are taxed just like the Florida Lottery. So, a $5,000 win or more from a multi-state lottery is withheld at 24% and a W-2G will be sent to you on wins of $600 or more.
The one slight difference is Florida residents will be responsible for paying state taxes if they bought a winning multi-state lottery ticket in another state. If the winning ticket was purchased in Florida, there is no need to worry about state taxes.
Failure to report gambling winnings can be a costly mistake for taxpayers, especially if penalties and interest start to add up. The IRS already knows about any large winnings because they get a copy of your W-2G from the operator.
They may not necessarily know about smaller activity that does not trigger a W-2G, but you still have a responsibility to report all winnings. Underreporting can even mess up other parts of your tax returns, costing you more than any potential savings.
Translation: just pay your taxes, it is not worth messing with the IRS.
Josh Markowitz is a freelance writer for FloridaBet.com. He is a lifelong sports fan with an emphasis on basketball, football, baseball and the scouting/evaluation process. A graduate of Elon University's School of Communications, Josh also has experience in television production.
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