If you have ever dreamed of winning big at slot machines, the IRS’ tax laws can come into play when winning a large sum. On the bright side, gambling losses may often be deducted and your winnings could help keep your taxes out of higher brackets; but before making decisions based on this knowledge alone it would be prudent to consult a tax professional or consult local gambling taxes in order to stay compliant.
Tax rules regarding gambling winnings can be complex and vary by state and locality, but generally speaking the Internal revenue service (IRS) considers all winnings to be income. This includes cash and non-cash winnings from slot machines as well as those won from table games; taxpayers should report all such winnings on their federal income tax returns and may require withholding for federal income tax purposes – typically for wins exceeding $5, 000 from slot machines or $600 from table games.
As soon as you hit a jackpot in a slot machine, lights flash, music plays, and bells ring out – not to mention being welcomed by an attendant to verify your victory – but your first thought may not be about taxes; that is because the IRS requires all winnings from slot machines, bingo, keno and poker tournaments be reported regardless of whether they were won for cash or merchandise.
If your winnings meet the threshold for mandatory withholding, the payer will provide you with a W-2G form displaying both your total winnings and how much federal income tax was withheld from them. Make sure to keep a copy for your records.
Your gambling winnings may qualify as itemized deductions on your tax return if you itemize deductions, but proving them may prove challenging unless you keep convincing records of all gambling activity, including losses. It would be prudent to use player cards that record play or some other means to document gambling activity and prove winnings.
Notably, the amount of federal taxes withheld from slot machine winnings depends on both your federal progressive income tax bracket and other sources of income you may have during the year. Since large gambling winnings could push you into a different bracket and force you to pay more in taxes than anticipated, it’s wise to consult a tax professional prior to commencing gambling activities and maintain accurate records of both winnings and losses to avoid surprises when filing tax returns – regardless of whether they’re professional gamblers or recreational gamers alike. Proper tax planning could make all the difference for success -.