Gambling Winnings Tax Rate 2018

• Federal Gambling Winnings Tax Rate
• Does Pa Tax Gambling Winnings
• Gambling Winnings Tax Form
• Gambling Winnings Tax Rate 2018 Brackets
• Gambling Winnings Tax Rate 2018 United States Chart

Personal tax rates begin at 2 percent and increase to a maximum of 5.75 percent in 2018. In Iowa, there's an automatic 5 percent withholding for state income tax purposes whenever federal taxes.

1. Effective for taxable years beginning after December 31, 2017, the withholding rate under Section 3402(q) applicable to winnings of $5,000 or more from sweepstakes, wagering pools, certain parimutuel pools, jai alai, and lotteries (formerly 25%) is now 24%.
2. Nevada is comfortable with a 6.75% rate because it's had legalized gambling for decades and knows how much money will be brought in. Other states like Illinois, Pennsylvania and Tennessee are new to the business and could drop tax rates in the future.

Welcome to a new day — a day that sports betting fans will remember for the rest of their lives.

On May 14, 2018, the Supreme Court struck down a federal law that effectively banned commercial sports betting in most all states. As a result of overturning PASPA, each state is allowed to authorize wagering on sports. One day soon you may be able to bet that the fifth pitch in the fifth inning of a baseball game will be a strike.

You can also bet that the money you win by betting sports is considered taxable income according to the IRS.

Here’s what you need to know about sports betting taxes in 2018.

An overview of taxable sports betting income

First off, gambling income is almost always taxable income. According to the IRS, gambling winners must report all of their winnings – including cash and the fair market value of any item won, such as a raffle item — on their federal income tax returns.

Casinos, as the payer of winnings, are required to withhold federal taxes from winnings above $5,000. New as part of the 2018 tax reform, that withholding rate is 24 percent, down from 25 percent in 2017. Depending on the total of your winnings, you may receive one or more Forms W-2G which reports the amount you won, including any tax withheld. All winnings reported on Form W-2G should be reported as other income on Form 1040, unless gambling is your trade or business.

Click here to get more details on Forms W-2G and 5754 for 2018.

Double down on deductions

The good news here is that you may deduct gambling losses if you plan on itemizing your deductions. But it’s also worthy to note that as part of tax reform, the standard deduction nearly doubled for all taxpayers. That means it’s likely that fewer taxpayers will have enough deductions to make itemizing an attractive option. According to tax law, you can only deduct your losses up to the amount of your total winnings. For example, if you won $2,000 on sports betting over the last year, you may only deduct $2,000 in losses if applicable. The same goes for any form of gambling.

If you plan on itemizing and deducting your losses, you must keep an accurate, detailed record of your wins and losses. You also need to provide sports betting tickets, receipts, or other statements that show the total of your winnings and losses. Your “sports betting diary,” so to speak, needs to include items such as dates, the type of gambling activity, the establishment at which the bet was placed, and dollar amounts.

For any avid sports bettor, it’s crucial to plan accordingly.

Professional gamblers: tax reform is here

If you pursue gambling regularly with the intention of making a profit, you are considered self-employed for tax purposes.

Under the new Tax Cuts and Jobs Act, those in the trade or business of gambling may no longer deduct non-wagering expenses, such as travel expenses or fees, to the extent those expenses exceed gambling income. Gambling losses include the actual wager and associated costs. Rather than claiming your winnings on sports betting as “other income,” you need to file a Schedule C to report self-employment income. You can also deduct any costs of doing business on Schedule C as long as it’s not more than your income. This new rule went into effect on Jan. 1, 2018.

Examples of deductions for a professional sports gambler include online or magazine subscriptions to insider content, a portion of your monthly internet costs (if you wager online), and travel expenses if you wager in-person at a casino. If you are a pro, then your gambling income is considered regular earned income and is taxed at your marginal income tax rate.

Keep in mind that TaxAct makes it simple for you to itemize and fill out the right tax forms to help ensure you maximize your deductions for the year.

Disclaimer: As a reminder, gambling addictions are a serious problem that need to be addressed as soon as possible. If you or someone you know has issues with gambling, please call 1-800-BETS OFF or seek help immediately.

Federal Gambling Winnings Tax Rate

More to explore:

Over the past two weeks 7,874 competitors (myself included) paid $10,000 to enter the main event of the World Series of Poker. Who would win the money? And how much of the winnings would they actually get to keep?

One important note: I do need to point out that many of the players in the tournament were “backed.” Poker tournaments have a high variance (luck factor). Thus, many tournament players sell portions of their action to investors to lower their risk. It is quite likely that most (if not all) of the winners were backed and will, in the end, only enjoy a portion of their winnings. I ignore backing in this analysis (because the full details are rarely publicized). Now, on to the winners.

Congratulations to John Cynn of Evanston, Illinois for winning the 2018 WSOP Main Event and a cool $8,800,000. After a mammoth 10-hour heads-up battle against Tony Miles (where the chip lead went back and forth), Mr. Cynn finally prevailed when his king-jack flopped trips and all Mr. Miles could muster was queen-high. Mr. Cynn will pay federal income tax, self-employment tax (all nine of the final players are professional gamblers), and Illinois income tax. Of his winnings he’ll lose an estimated $3,860,183 to tax (keeping $4,939,817), a tax burden of 43.87%. Mr. Cynn definitely benefits from tax reform; had he had the same winnings in 2017 he would have owed $4,094,676 so he saves $234,493. Another way of looking at this is his tax burden last year would have been 46.53%. Mr. Cynn has the second highest tax burden of the final nine.

The aforementioned Tony Miles finished in second place. A resident of Jacksonville, Florida, Mr. Miles benefits from Florida’s lack of a personal income tax. Mr. Miles, like all of the Americans at the final table, will owe federal income tax and self-employment tax; he’ll owe an estimated $1,939,341 (38.79%) of his winnings.

Finishing in third place and winning $3,750,000 was Michael Dyer of Houston. Mr. Dyer had the chip lead for the first part of the final table but ran into a full house of held by Mr. Miles. The Texan avoids state income tax but will still lose an estimated $1,449,275 to federal tax (38.65%). Mr. Dyer has the lowest tax burden of the six Americans at the final table (and the second-lowest tax burden overall).

Does Pa Tax Gambling Winnings

Nicolas Manion of Muskegon, Michigan started the final nine with the chip lead but couldn’t make it through; he ended up in fourth place for $2,825,000. Mr. Manion is the only individual who will end up paying three taxes: federal, state, and city. Michigan has a flat income tax of 4.25% and Muskegon has a city income tax of 0.5%. Still, Mr. Manion is better off in 2018 than if he had won this in 2017; he’ll lose only an estimated $1,217,323 to tax (43.09%).

Joe Cada finished fifth for $2,150,000. If that name sounds familiar, it should: Mr. Cada won the Main Event in 2009. This time around Mr. Cada’s pocket tens lost a classic race against Mr. Miles’s ace-king. Thanks to tax reform, Mr. Cada loses only 40.59% of his winnings to tax ($872,635) compared to 42% back in 2009. Mr. Cada, a resident of Shelby Township, Michigan, owes federal and Michigan tax.

Aram Zobian of Cranston, Rhode Island, ended up in sixth place for $1,800,000. A professional poker player, Mr. Zobian will owe federal and Rhode Island tax. Rhode Island has marginal tax rates up to 5.99%, so it’s in the middle of the pack for states. Overall, Mr. Zobian will owe an estimated $721,821 in tax (40.10%).

Alex Lynskey of Melbourne, Australia finished in seventh place. While the US and Australia have a tax treaty, it does not cover gambling. Thus, of Mr. Lynskey’s $1,500,000 of winnings, he loses 30% off the top to the IRS ($450,000). Australia does not tax gambling winnings for amateur gamblers but it does tax gambling winnings of professional gamblers. The Australian tax system somewhat mirrors ours in that are marginal rates; however, Australia’s top rate is 45% compared to our 37%. The US-Australia Tax Treaty does specify that a foreign tax credit can be taken for taxes paid to the other country. Mr. Lynskey would have paid an estimated $666,296 to the Australian Taxation Office; given the US tax he’s paid that number is reduced to $216,296 (or $292,000 Australian).

Gambling Winnings Tax Form

In eighth place was Artem Metalidi of Kiev, Ukraine. Mr. Metalidi will pay the least tax of any of the final nine, both in dollars and by percentage. Ukraine has a flat tax rate of 18% plus a 1.5% military tax (a total of 19.5%). Mr. Metalidi will lose only an estimated $243,750 of his $1,250,000 to tax. None of that is going to the IRS: The tax treaty between the Ukraine and the United States exempts gambling winnings from taxation.

Antoine Labat, a professional poker player from Vincenna, France, finished in ninth place. He earned an even $1 million, but that’s before taxes. The United States and France have a tax treaty exempting gambling winnings, so he lost nothing to Uncle Sam. However, France is anything but a low-tax environment. While 2018 French tax rates have not been announced (they’re not announced until late in the year), based on 2017 rates Mr. Labat will lose $432,574 (€369,721) of his $1 million (€854,701) winnings to taxes.

Here’s a table summarizing the tax bite:

That means 39.01% of the winnings of the final nine will go to taxes. That’s up from 2017 because last year four of the final nine faced no taxation (they were all residents of the United Kingdom which does not tax gambling winnings).

Here’s a second table with the winners sorted by their estimated take-home winnings:

Gambling Winnings Tax Rate 2018 Brackets

Mr. Metalidi finished in eighth place but based on after-tax winnings he finished in seventh place. The Ukraine’s low flat-rate income tax gives him a benefit over the relatively high taxes in Australia.

But the true winner this year was the Internal Revenue Service. The IRS’s take of $9,811,437 exceeds the combined after-tax winnings of the first and second place winners ($8,000,476) and nearly exceeds the top three! Taxes may be what we pay for a civilized society, but we sure pay a lot of them. One truism this year (as usual) is that the house (the IRS) always wins.

Gambling Winnings Tax Rate 2018 United States Chart

Tags: WSOP