Whether you’re hitting the slots in Vegas, buying scratch-offs at the gas station, or playing online poker from your couch, there’s one thing all gamblers have in common: Uncle Sam wants his cut.

Yep, gambling winnings are taxable. But don’t worry—here’s what you need to know to keep things smooth with the IRS (and maybe even save yourself some money).

Yes, You Have to Report All Winnings

It doesn’t matter if you win $50 on a scratch-off or $5,000 in a poker tournament—if you win money gambling, it needs to be reported on your federal tax return. You’ll list it under “other income” on Schedule 1 of your Form 1040.

And if your prize is something other than cash (like a car or vacation), you still have to report its fair market value as income.

When You’ll Get a Form W-2G

For bigger wins, the casino or other payer might send you a Form W-2G, which also goes to the IRS. Here’s when that usually happens:

• You win $1,200 or more on slots or bingo
• You win $1,500 or more on keno
• You cash in $5,000 or more in a poker tournament
• Or, more generally, you win $600+ and the payout is at least 300 times your bet

If federal income tax is withheld (typically 24%), that will also show up on the W-2G.

You Can Deduct Gambling Losses—But Only If You Itemize

Good news: You can deduct your gambling losses to help offset your winnings. The catch? You can’t deduct more than you’ve won, and only if you itemize deductions on your return.

So if you won $800 but lost $1,200, you can only deduct $800. And you need solid proof—no guessing!

Keep Meticulous Records

The IRS loves documentation, and when it comes to gambling, so should you. Keep a detailed log that includes:

• The date and type of gambling activity
• Where you gambled
• What you won and lost
• Receipts, tickets, and any relevant forms (especially W-2Gs)

Your notes can help you prove your losses if the IRS ever asks.

Avoid Red Flags and Audits

If the IRS gets a W-2G and your return doesn’t show that income, expect questions. Likewise, claiming big losses without much in winnings can raise eyebrows.

The best defense is good records and honest reporting.

Don’t Forget State Taxes

Federal taxes aren’t the only ones that apply. Many states also tax gambling winnings—and they don’t always follow the same rules.

If you gamble out of state, you may owe taxes there too, but you might be eligible for a credit in your home state. Check with your state tax department to make sure you’re covered.

Final Thoughts

Gambling might be a game of chance, but dealing with the IRS shouldn’t be. Report your winnings, track your losses, and stay organized. Doing so will help you stay compliant—and might even reduce your tax bill.

If you need help navigating the complexities of gambling taxes or maximizing your deductions, PSA CPA is here to help. Contact us today at (301) 879-0600.