Withholding on Gambling and Lottery Winnings: Rates and Exceptions

Federal tax on gambling and lottery winnings withholding is 24% of your net proceeds, and it kicks in once a single win crosses $5,000 for most games. Below that, a casino or lottery agency may still report the win to the IRS on a Form W-2G without taking any money out of your payout. Table games work differently, non-cash prizes work differently, and non-U.S. residents face a higher rate. The rules below reflect the reporting thresholds that took effect in 2026.

Reporting and Withholding Are Not the Same Thing

Reporting means the payer files a Form W-2G with the IRS documenting your win. Withholding means the payer actually deducts tax from your payout and sends it to the government. A win can trigger reporting without triggering withholding.

Starting in 2026, the minimum reporting threshold for most gambling wins rose to $2,000, up from the $1,200 slot and bingo threshold and the $1,500 keno threshold that had stood for decades. The change came from the One, Big, Beautiful Bill Act, signed in July 2025, which also indexes the figure for inflation going forward.¹

So there’s a zone between the reporting floor and the withholding floor. Win $3,000 on a slot machine and you’ll receive a W-2G, but the casino hands you the full $3,000. Win $8,000 on a lottery ticket and you’ll receive a W-2G plus a payout already 24% lighter.

When 24% Actually Gets Taken Out

For most gambling, the payer must withhold federal income tax when your proceeds — winnings minus your wager — exceed $5,000 and the payout is at least 300 times what you bet. The 24% rate applies to the proceeds, not the gross payout.²

State-run lotteries and sweepstakes follow a simpler rule. Withholding is mandatory whenever your net proceeds exceed $5,000, regardless of the wager size. The 300-to-1 payout ratio does not apply. A $2 Powerball ticket that pays $10,000 triggers withholding because the proceeds clear $5,000, even though the payout ratio is 5,000 to 1.²

The reporting thresholds that generate a W-2G (but not necessarily withholding) break down by game:

Slot machines and bingo: W-2G at $2,000 or more from a single play, based on gross payout with no reduction for your wager.
Keno: $2,000 threshold, calculated after subtracting the wager on that game. Bet $200 and win $2,100, and the reportable figure is $1,900, so no W-2G.
Sports betting and horse racing: W-2G when net winnings reach $2,000 and the payout is at least 300 times the wager.
Sweepstakes and lotteries: W-2G at $2,000 in net winnings.
Poker tournaments: unchanged $5,000 threshold, reduced by the buy-in.

The 24% figure itself is not arbitrary. The statute ties it to the “third lowest rate of tax” under the individual income tax brackets, so if Congress changes the brackets, the withholding rate moves automatically.²

Table Games: The Big Exception

Blackjack, baccarat, craps, roulette, and big-6 wheel do not trigger W-2G reporting or federal withholding for U.S. persons, regardless of the amount won. The IRS instructions for Form W-2G simply don’t list these games as reportable. You can walk away from a blackjack table with $50,000, and the casino files nothing.¹

The income is still fully taxable. The IRS just has no automatic paper trail for it. That means no 24% is withheld from your payout at the cage — but you’re still legally required to report the winnings on your return and may owe a much larger amount when you file.

Non-Cash Prizes: Withholding Without Cash

If you win a car, a trip, or any physical prize, the IRS treats its fair market value as if it were cash. Reporting and withholding rules apply based on that value.³

The problem is obvious: there’s no cash to withhold from. When mandatory withholding applies, you typically have to pay the 24% directly to the prize sponsor before you can take the prize. Win a $50,000 car from a $5 raffle ticket and you’re handing over roughly $12,000 in cash up front. Winners have forfeited prizes because they couldn’t cover the withholding. Worth thinking about before you enter a sweepstakes for a luxury item you couldn’t otherwise afford.

The sponsor issues a W-2G showing the fair market value and the withholding. If you believe the value was inflated, you can report a different figure on your return with an independent appraisal to back it up, though that raises the odds of IRS scrutiny.

Non-Resident Aliens: 30%

If you’re not a U.S. citizen or resident alien, the default withholding rate on gambling winnings is 30% of the gross amount. Tax treaties eliminate or reduce this rate for residents of a long list of countries.

Under current treaty provisions, residents of these countries pay no U.S. tax on gambling winnings: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom. Malta has a reduced 10% rate. Hungary and Russia were previously exempt but their treaty provisions were suspended in 2024.⁴

Non-resident aliens also get a separate exemption for table games. Blackjack, baccarat, craps, roulette, and big-6 wheel winnings are exempt from both reporting and the 30% withholding, even without a treaty.⁴

State Withholding Sits on Top of Federal

Most states with an income tax also withhold from gambling winnings, generally using the same $5,000 trigger. State withholding rates run from zero in no-income-tax states up to about 10.9%. The rate depends on where the ticket was purchased or the game was played, not where you live. A Texas resident who wins on a New York lottery ticket still faces New York withholding. Some cities add local withholding on top of state.

Between federal and state, a winner in a high-tax jurisdiction may see more than a third of a large prize taken before the payout ever reaches them.

The 24% Is a Prepayment, Not the Final Tax

The 24% withheld is an advance payment against the tax you actually owe for the year. Your real rate on gambling income depends on your total income from all sources. If you sit in the 10% or 12% bracket, some of the withheld amount comes back as a refund. If a large win pushes you into the 32% or 37% bracket, you’ll owe more when you file, on top of what was already taken.³

A significant win can also require quarterly estimated tax payments, especially if the 24% doesn’t cover your actual bracket or if you won on table games where nothing was withheld. Without those payments you could face an underpayment penalty at filing time.³

Backup Withholding If You Don’t Give a Tax ID

The payer needs your Social Security Number or Individual Taxpayer Identification Number, plus two forms of ID (one with a photo), to complete the W-2G. If you can’t or won’t provide the tax ID, the payer applies backup withholding at 24% — the same as the regular rate. In practice, refusing to hand over your SSN doesn’t mean a higher rate; it means 24% comes out of wins between the reporting threshold and the $5,000 mandatory withholding mark that otherwise would have been paid in full.⁵

Refusing ID also doesn’t erase the tax obligation. The IRS still gets the W-2G. The only thing you’ve made harder is matching the withheld amount to your account when you file.

Group Winners and Split Prizes

When a lottery pool or group of friends shares a winning ticket, only one person collects, but everyone owes tax on their share. Form 5754 sorts this out. The collector lists each winner’s name, address, tax ID, and share, and the payer then issues a separate W-2G to each person.⁵

One detail catches people out: the reporting and withholding thresholds apply to the total prize before the split, not each person’s slice. A $25,000 lottery win divided five ways still triggers mandatory withholding because the total exceeds $5,000. Each W-2G will show a $5,000 share and the withholding taken from it. Form 5754 stays with the payer and is not filed with the IRS.⁵

1
Internal Revenue Service. Instructions for Forms W-2G and 5754
2
Office of the Law Revision Counsel. 26 USC 3402 – Income Tax Collected at Source
3
Internal Revenue Service. Topic No. 419, Gambling Income and Losses
4
Internal Revenue Service. Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
5
Internal Revenue Service. Instructions for Forms W-2G and 5754