Gambling winnings are fully taxable. They include everything from large lottery and sweepstakes payouts to money you win playing bingo and items you win in a raffle. If you win a noncash prize, which can be anything from a bottle of booze to a car, you must include its fair market value when figuring your income. If you itemize your deductions, you can deduct your gambling losses for the year on Schedule A, but only up to the amount that you report as gambling winnings. You should keep an accurate diary of your gambling winnings and losses, and retain verifiable documentation of your activity.
The payer must provide you with a Form W-2-G if you win:
$600 or more and the amount is at least 300 times the amount of the wager.
$1,200 or more in winnings from bingo or slot machines.
$1,500 or more in winnings from keno.
More than $5,000 in winnings from a poker tournament.
Any winnings that are subject to a federal income tax withholding requirement.
When winnings are reported on Form W-2-G any federal income taxes that are withheld will be withheld at a flat rate of 25%. If you did not provide your tax ID number to the payer the withholding rate is increased to 28%. Withholding is required when the winnings, less the amount of a bet exceed $5,000 and the winnings are at least 300 times the amount of the bet.
You should receive a copy of Form W-2G showing the amount you won and the amount of any tax withheld. Even if you don’t receive a Form W-2G, you should include your winnings on your tax return.