How much taxes does a jackpot winner need to pay in the US?

Most people spent their entire lives chasing casino jackpots, and some of them are lucky enough to win them on the first couple of visits to the local or online casino. Winning the biggest prize at a casino is the ultimate goal for every gambler, just because most of the jackpots in a casino hold a life-changing amount of money that can set you up for good.

However, even though this process is exciting and will pump you full of adrenaline, it is important to manage it the right way just to avoid getting into some trouble later on.

The most important thing when it comes to casino jackpot winners is to create a strategic plan on how to manage the entire process just because it doesn’t end with you getting the money from the casino.

One of the first things you need to worry about is your TAX obligation, which needs to be paid the right way. So, this got us wondering, how much taxes does a jackpot winner need to pay in the US? Let’s find out.

How Gambling Winnings Are Taxed

Winning a substantial amount of money on a hot drop jackpot must be very exciting, but you should pause the celebration and focus on your TAX obligation. In the United States, any substantial amount of money won in a legally operated game of chance will deduct your winnings by 24% in form of taxes and will give you a copy of IRS Form W-G2 to record the transaction.

When we talk about a substantial amount of money that is taxable by 24% it depends on which type of game you were playing. Since the online casino world offers a huge variety of games, you should take note of the type of game you were playing since it will make a difference in your taxes.

A substantial amount of money is different for every game. For example, it is $1,200 or more winnings at a slot machine or bingo, $1,500 for keno, and $5,000 for sweepstakes and lotteries.

Since we talking about a jackpot win in a casino, which usually comes from playing slots, most of the jackpots are higher than $1,200 which means that you are obligated to pay 24% in taxes.

Depending on the casino you play, sometimes the taxes will be automatically deducted from your payout and sent directly to the IRS, with Form W-G2 as the documentation.

Reporting Gambling Winnings

When it comes to preparing all the taxes for the year, you should include the gambling payout you won in the report, even though the taxes have been already paid, under “Other Income” on Form 1040.

However, it is important to understand that the 24% in taxes that you’ve already paid was an estimated tax. The real amount that you’ll own depends on the total income for the year.

Currently, there are seven tax brackets in the United States, and depending on how much money you’ve made throughout the year (including your winnings) sometimes you may be obligated to pay more or get some of the money back.

For example, if your total income for the year came out to more than $165,000 (including your jackpot winnings) you will be obligated to pay more taxes on your winnings. However, if your total income comes lower than $86,000 you may even get some money back.

On the other hand, if you are a non-resident of the United States, you are still obligated to pay taxes, and it comes at a flat rate of 30%. Additionally, non-residents cannot deduct gambling losses in order to lower their tax obligations.

Are Gambling Losses Deductible?

U.S residents are allowed to deduct any money lost on gambling from their winnings for tax purposes. This means that you will tax only the profits that you took from an online casino.

With that said, if you lose more money than you win, this cannot be claimed as a tax write-off. So, if you lose more money than you’ve earned, you are still obligated to pay taxes.

Do the Individual States Tax Gambling Winnings Additionally?

There are different points of view on gambling in every state in the United States, and therefore the situation depends on where you live and where you’ve won your jackpot. Some states require you to claim the gambling winnings in the state where they were won.

Most states tax all income earned while playing games of chance in their state, regardless of your residency.

This means that your resident may require you to report your winnings, but also offer a deduction for taxes that you’ve already paid to a non-resident state.