How Gambling Winnings Are Taxed: W-2G, Withholding, and Losses

Under federal law, every dollar you win from gambling is taxable income, and how gambling winnings are taxed depends on the game, the size of the win, and whether you itemize your deductions. You report the full amount you won on your return for the year you received it, whether or not the payer hands you a tax form.¹ Casinos and other payers withhold 24 percent federal tax on certain payouts, and you can deduct losses to offset winnings, but only if you itemize and only up to 90 percent of those losses starting in 2026.

What Counts as a Taxable Winning

The IRS treats gambling income broadly. Cash from table games, slot machines, sports books, poker tournaments, lottery tickets, bingo, keno, and raffles all count. So do non-cash prizes like cars, vacations, and electronics, reported at their fair market value on the date you won them.¹ A $3,000 comped trip is $3,000 of income even though no check ever changed hands.

You report the gross winning, not the profit after your wager. A $500 payout on a $5 bet is $500 of income; the $5 is handled through the loss deduction process, not by netting it out on the income line. And a below-threshold win with no paperwork is just as taxable as a jackpot with a W-2G attached. The IRS relies on you to self-report those smaller wins.

High-value casino comps such as paid weekends in a suite with airfare can also be taxable. Routine perks like a buffet voucher generally aren’t treated that way in practice.

W-2G Reporting Thresholds for 2026

Casinos and other payers file Form W-2G once your winnings hit certain dollar amounts. The One, Big, Beautiful Bill Act raised and standardized these thresholds, and for 2026 they now adjust annually for inflation. The baseline reporting threshold is $2,000.²

Bingo and slot machines: $2,000 or more (up from the longstanding $1,200).
Keno: $2,000 or more after subtracting the wager (up from $1,500).
Poker tournaments: $2,000 or more after subtracting the buy-in.
Sports betting, horse racing, and other wagers: $2,000 or more, if the payout is also at least 300 times the amount wagered.

The W-2G lists your name, Social Security number, the date of the win, the payout amount, and any tax withheld. Most payers hand it to you at the cage; otherwise it arrives by mail before filing season.³ Check the amounts against your records. A mismatched W-2G invites IRS questions.

The W-2G threshold is a reporting trigger, not a taxability trigger. If you win $1,800 on a slot in 2026, no form is generated, but you still owe tax on that $1,800.

Federal Withholding at 24 Percent

When a payer withholds federal tax from a gambling payout, the flat rate is 24 percent, applied to net proceeds (winnings minus the wager) and shown in Box 4 of the W-2G.⁴ Whether withholding kicks in depends on the game:

Sweepstakes, lotteries, wagering pools, and poker tournaments: withholding applies when net winnings exceed $5,000.
Sports betting, horse racing, and other wagers: withholding applies when net winnings exceed $5,000 and the payout is at least 300 times the wager.
Bingo, keno, and slot machines: starting in 2026, 24 percent withholding applies at $2,000 or more. Before 2026, these games were generally exempt from regular withholding.⁵

If you don’t give the payer a valid Social Security or taxpayer identification number, backup withholding applies at the same 24 percent rate.⁴ Either way, the withheld amount is a credit on your return. It reduces your final tax bill dollar for dollar, so it’s not money lost, only money the IRS collected early.

For non-cash prizes like a car, the payer may withhold at an effective rate of 31.58 percent because the tax has to come from somewhere other than the prize itself. That grossed-up rate keeps the net withholding at 24 percent of the combined value of the prize and the tax paid on your behalf.⁴

When You May Owe More Than Was Withheld

Withholding at 24 percent won’t necessarily cover your full liability. A large win can push you into a higher bracket, and many wins fall below the withholding thresholds entirely, so nothing is taken out at the source. Estimated tax payments fill the gap.

The IRS generally expects estimated payments during the year if you’ll owe at least $1,000 after subtracting withholding and refundable credits, and your total withholding and credits will fall short of either 90 percent of your 2026 tax or 100 percent of your 2025 tax, whichever is smaller.⁵ If your 2025 adjusted gross income exceeded $150,000, that 100 percent becomes 110 percent.

Estimated payments for 2026 are due April 15, June 15, September 15, and January 15, 2027. If you win big in July and haven’t been making payments, calculate what’s owed and send the third-quarter payment by September 15 to limit the penalty. The IRS charges interest-based penalties on underpayments, and not realizing you had to pay isn’t a waiver.⁵

Deducting Gambling Losses in 2026

You can deduct gambling losses to offset winnings, but the rules got tighter. Under amended Section 165(d), you may deduct only 90 percent of your gambling losses, and only up to the amount of gambling winnings you reported that year.⁶ Before 2026, losses were deductible dollar for dollar up to your winnings.

In practice: if you won $10,000 and lost $10,000 during the year, you report $10,000 of income and deduct $9,000 of losses. The remaining $1,000 is taxable even though you broke even at the tables. Tax professionals call this “phantom income.”

You also cannot use gambling losses to reduce other kinds of income. If you earned $60,000 at your job and lost $15,000 gambling with no winnings, none of that $15,000 is deductible. The deduction exists to offset reported gambling winnings, not your salary or investment income.

The Itemizing Hurdle

Gambling losses are an itemized deduction on Schedule A.⁶ They only help if your total itemized deductions exceed the standard deduction. For 2026, that’s $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.⁷ Unless mortgage interest, state taxes, or charitable contributions already push you past those numbers, your gambling losses may produce no tax benefit at all. Many casual gamblers find this out too late.

Records the IRS Expects

The IRS wants a contemporaneous log recording the date, type of activity, name and location of the establishment, and the amount won or lost on each occasion.⁸ Contemporaneous is the key word. A spreadsheet built the night before an audit will not help.

Supporting documents include W-2G forms, wagering tickets, losing tickets, bank withdrawal records, and any statements the casino provides showing your play. A year-end win/loss statement from a player’s card is useful but generally not enough on its own. The IRS has disallowed deductions in audits where taxpayers relied solely on that statement without a diary behind it.⁸

Splitting a Winning Ticket

When two or more people share a winning wager, the person who collects the payout fills out Form 5754, listing each group member’s name, address, taxpayer identification number, and share.⁹ The payer then issues a separate W-2G to each person. Skip this step and the whole jackpot ends up on the collector’s return, with the collector responsible for the full tax. Untangling it later means amended returns and possible audits.

If You’re Not a U.S. Resident

Nonresident aliens who win in the United States face a default federal withholding rate of 30 percent, not 24 percent. Some tax treaties reduce or eliminate that rate depending on your country of residence. Nonresident aliens generally cannot deduct gambling losses against winnings, and the payer reports winnings on Form 1042-S rather than a W-2G.

State Taxes on Gambling Winnings

Most states treat gambling winnings as ordinary income, taxed at whatever rate applies to your bracket. Rates range from zero in states without an income tax to above 13 percent at the high end, with most falling between 3 and 7 percent. A few states exempt their own state lottery winnings while still taxing casino and sports betting profits.

Win money in a state where you don’t live and you may need to file a nonresident return there. Casinos and lottery agencies often withhold state tax from large payouts, with those amounts appearing on the W-2G alongside federal withholding. Your home state usually gives you a credit for taxes paid to another state to prevent double taxation, though not always for the full amount. Check both states’ rules before assuming you’re covered.

1
Internal Revenue Service. Topic No. 419, Gambling Income and Losses
2
Internal Revenue Service. Instructions for Forms W-2G and 5754
3
Internal Revenue Service. About Form W-2G, Certain Gambling Winnings
4
Internal Revenue Service. Instructions for Forms W-2G and 5754 – Section: Withholding
5
Internal Revenue Service. 2026 Form 1040-ES Estimated Tax for Individuals
6
Office of the Law Revision Counsel. 26 USC 165 – Losses
7
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
8
Internal Revenue Service. Diary or Similar Record
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Internal Revenue Service. Form 5754, Statement by Person(s) Receiving Gambling Winnings