Income tax is withheld from certain kinds of gambling winnings. The amount withheld is 28% of the proceeds paid (the amount of your winnings minus the amount of your bet).

Gambling winnings of more than $5,000 from the following sources are subject to income tax withholding.

• Any sweepstakes, wagering pool, or lottery.
• Any other wager if the proceeds are at least 300 times the amount of the bet.

It does not matter whether your winnings are paid in cash, in property, or as an annuity. Winnings not in money are taken into account at their fair market value.

Gambling winnings from bingo, keno, and slot machines are not subject to income tax withholding. If you receive gambling winnings not subject to withholding, you may need to make estimated tax payments. (See chapter 2.)

If you do not pay enough tax through withholding or estimated tax payments, you may be subject to a penalty. (See chapter 4.)

Form W-2G. If a payer withholds income tax from your gambling winnings, you should receive a Form W-2G, Certain Gambling Winnings, showing the amount you won and the amount withheld.

Reporting your winnings. Report your winnings on line 21 of Form 1040. Report the tax withheld on line 58 of Form 1040. Gambling losses are deductible only to the extent they offset gambling winnings. You must use Schedule A (Form 1040) to deduct your losses and to deduct state tax withholding.

Information to give payer. If the payer asks, you must give the payer all the following information.

• Your name, address, and social security number.
• Whether you made identical wagers (explained next).
• Whether someone else is entitled to any part of the winnings subject to withholding. If so, you must complete Form 5754, Statement by Person(s) Receiving Gambling Winnings, and return it to the payer. The payer will use it to prepare a Form W-2G for each of the winners.

Identical wagers. You may have to give the payer a statement of the amount of your winnings, if any, from identical wagers. If this statement is required, the payer will ask you for it. You provide this statement by signing Form W-2G or, if required, Form 5754.

Identical wagers include two bets placed in a pari-mutuel pool on one horse to win a particular race. However, the bets are not identical if one bet is "to win" and one bet is "to place." In addition, they are not identical if the bets were placed in different pari-mutuel pools. For example, a bet in a pool conducted by the racetrack and a bet in a separate pool conducted by an offtrack betting establishment in which the bets are not pooled with those placed at the track are not identical wagers.

Backup withholding. If you have any kind of gambling winnings and do not give the payer your social security number, the payer may have to withhold income tax at the rate of 31%. This rule applies to keno winnings of more than $1,500, bingo and slot machine winnings of more than $1,200, and certain other gambling winnings of more than $600.

Previous | First | Next

Publication Index | 2000 Tax Help Archives | Tax Help Archives | Home