So you’ve managed to beat the oddsmakers at a Tennessee sportsbook? Or perhaps you’ve hit it big playing Mega Millions, Powerball or another Tennessee Lottery game?

• Filing Taxes Casino Winnings No Deposit
• Filing Taxes Casino Winnings Losses

Not to rain on your parade, but the IRS considers any gambling winnings taxable income. This includes cash and material prizes such as boats and cars.

Depending on the size of your win, you may receive a Form W-2G, Certain Gambling Winnings and may have federal income taxes withheld from your prize by the gambling establishment. The general rule of thumb is to report your winnings once you hit the threshold of $600 or winnings of 300 times the amount you have wagered in a tax year. The sportsbook should send you a Form W-2G. This will make it easy for you to report your winnings on Line 7a of your Form 1040 for the IRS. Tax and Casino Winnings in the US. In the US, casino returns are fully taxed by the federal government and sometimes the state government. Tax is deductible from both cash and non-cash returns, and the Internal Revenue service (IRS) is the organization saddled with this responsibility. A payer may also send you a Form W-2G if it withholds part of your winnings for federal income tax purposes. You will find the amount of withholding in box 4 on the form. Example: If you win a non-state lottery prize of $10,000, the payer could withhold 25% upfront to pay the IRS in the event you fail to report the winnings at tax time.

According to federal law, you must report your winnings on your federal tax return for the appropriate year. This is especially crucial for Tennesseans now that online sports betting is legal.

Tennesseans might have many questions related to gambling and taxes. These might include how to report your winnings to the IRS, along with what rate the IRS taxes those winnings at.

Fortunately, it isn’t that complicated. The IRS has clear procedures in place for how to handle such instances. When you know those procedures, you can rest assured that you’re compliant with federal laws.

Sportsbooks and the Tennessee lottery can help you out in this regard as well. They also have to follow federal and state reporting procedures, so their protocols can make the process of reporting winnings even easier for players.

Here are your obligations under federal and state laws if you’ve successfully gambled in Tennessee.

How much will the IRS tax my gambling winnings?

Effective for tax years after 2017, the federal withholding rate for gambling winnings of $5,000 or more is 24%. That’s a cumulative amount for the entire year, so even if you win $1,000 on five or more separate occasions during the year, you still need to report your winnings.

Sportsbooks and the Tennessee lottery typically withhold 25% of your total winnings for tax purposes. That’s only if you provide the sportsbooks with your Social Security number, however.

If you choose to withhold your SSN from sportsbooks, they typically withhold 28% of your winnings. Sportsbooks need your SSN to accurately report their business dealings to the IRS.

Tennessee has no state earned income tax. Your winnings may be subject to the Hall Income Tax, however, for the 2020 tax year and prior years.

It really depends on how you use those funds. The state doesn’t consider your lottery and sports betting winnings themselves taxable income, but if you use the money to produce certain kinds of dividends and interest, the state may tax those dividends and interest.

There are many exceptions to the taxable dividends and interest list, such as interest paid on personal savings accounts. The Hall Income Tax sunsets completely on Jan. 1, 2021.

For 2020, the rate is 1%.

The IRS has a form specific to reporting gambling winnings. That’s where the Tennessee sportsbook apps and the Tennessee lottery can be of the greatest assistance to you.

Federal form W-2G, certain gambling winnings

The IRS puts the burden of sending out the W-2G on the organization that pays out winnings. If you win any cash or prizes this year, you should get a W-2G from that entity in plenty of time to file your federal taxes.

Fortunately, there’s nothing you need to do to the form. Do not include it in your IRS filing. You will need it when you file your federal income tax return, however. You should keep a copy for your own records for at least five years.

If your winnings reach one or more of the following thresholds, you should get a W-2G from the sportsbook you won with or the Tennessee lottery. Each entity you successfully gambled with will provide you with a separate W-2G.

Those federal thresholds are:

• Winnings of $1,200 or more from a bingo game or slot machine
• Winnings, minus your wager, of $1,500 or more from a keno game
• Winnings, minus your buy-in or wager, of more than $5,000 from a poker tournament
• Winnings of $600 or of a value at least 300 times the buy-in/wager or more, except those from bingo, keno, poker tournaments and slot machines
• Winnings that are subject to federal income tax withholding for any other reason

What if I don’t receive a Form W-2G?

If you’re a legal US citizen or resident, you must report your eligible gambling winnings on your federal earned income tax returns regardless of whether you receive a Form W-2G or not.

Contact the sportsbook operator or the Tennessee lottery if you need a W-2G and don’t receive it in a timely manner, there may have been an error.

If you still can’t get a W-2G, use Form 1040, Schedule 1 to report your winnings. Use the “Other Income” section to denote the value of your cash and material prize winnings.

Include that form with your other documents in your IRS filing for the appropriate year. There’s one more step you need to take even if you do receive a Form W2-G.

How to report winnings on your federal income tax return

The IRS requires you to report your gambling winnings on Form 1040, Schedule T, Line 8. If you do get a Form W-2G, this is a very simple process.

Since you are reporting your gambling winnings from all sources, gather up all your relevant W-2G forms (if you have more than one). If all your winnings came from a single source, this process is even easier.

Simply transfer the amount in Box 1 on your W-2G form to Line 7a of your 1040. If you received more than one W-2G, you will need to add up all the amounts in Box 1 on all the forms and then put that total in Line 7a of your 1040.

The same process applies if there is an amount shown in Box 2 on your W-2G forms. Include that amount in your total federal income tax withheld on Line 17 of your 1040.

This is the correct procedure for reporting gambling winnings for an individual. If you’re part of a group that won a cash or material prize, the process is a little different.

What if I’m part of a group of people that wins a cash prize?

If you and several of your co-workers pool resources to buy lottery tickets and win, or you go in with a couple of friends on a big sports wager, the IRS still considers your winnings taxable income. There’s a form just for these occasions.

That’s Form 5754. The sportsbook and/or the lottery use this form to prepare the W-2G when a group of people wins a prize, or the person receiving gambling winnings isn’t the actual winner.

The sportsbook or the lottery should send you a blank copy. The onus is on you to accurately fill it out and return it to the party granting the prize. They need it for their tax records.

Just like the W-2G, you shouldn’t include this form in your federal tax return. You should keep it for your own records, however. The minimum recommended time to do so is five years.

Are gambling losses tax deductible?

You can deduct your gambling losses. You must itemize your deductions in order to take advantage of that allowance, however. The IRS does not allow you to deduct more than you win in a tax year or deduct your expenses incurred while gambling.

Just like with any other deductions you claim, you should keep all relevant paperwork for a period of at least five years. This includes:

• Receipts for your wagers that denote the date and type of bet
• The name of the sportsbook or the location where you bought a lottery ticket
• The amount lost or won
• Wagering tickets
• Debit card records
• Bank statements
• Canceled checks

Many sportsbooks keep a running account of your activity in your account profile. This can make it easy to identify your total losses for the year and see if it would be worthwhile to itemize your deductions and report them.

Remember, deducting your losses isn’t a matter of subtracting your losses from your winnings and then simply reporting what’s leftover. You must report all your qualified winnings to the IRS regardless of any losses you suffer.

What if I win a Mega Millions or Powerball jackpot?

The IRS considers cash or material prizes won playing multi-state lotteries as taxable income. You would report such prizes using the same methods as if you won a prize playing a Tennessee lottery game.

The same goes for if you claim winnings in Tennessee but maintain your legal residence in another state.

The process of reporting the value of non-cash prizes is somewhat murky, however.

The IRS does supply a definition of the “fair market value” of material prizes. That is, “the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts.”

The IRS does not supply a formula to determine that value, however. You will have to check out the going rates for similar items in your area to determine the fair market value for your material prize.

Once you’ve determined that, you need to include that with your winnings for the year on your Form 1040. If you’re unsure of how to value your prize, this is where contacting the IRS may be beneficial.

Online sports betting and taxes

The IRS makes no differentiation between winnings won in-person or online in terms of gambling. Additionally, the IRS considers sports betting winnings taxable income.

You must report all your qualified sports betting winnings, whether they came through online or retail channels, to the IRS. The general rule of thumb is to report your winnings once you hit the threshold of $600 or winnings of 300 times the amount you have wagered in a tax year.

The sportsbook should send you a Form W-2G. This will make it easy for you to report your winnings on Line 7a of your Form 1040 for the IRS.

Tennessee is among the best states for gambling purposes, as the state does not tax your winnings in most cases. Following this advice, you can fulfill your federal obligations and enjoy the remainder of your winnings.

Players dream of hitting a big jackpot when they play the slots. When that day comes for you, you'll have questions about the taxes you must pay on the winnings.

Hand Pay Jackpots

When you hit the winning combination of symbols for a large jackpot, your slot machine locks up. Depending on the machine, the lights on top of the machine may come on and start flashing, music may play or bells ring. A slot attendant arrives promptly to see what you have won.

On jackpots smaller than $5,000, an attendant verifies that you hit the jackpot and then assists you in claiming your money at the cashier's cage. In the case of a large or progressive jackpot, the casino may have technicians come and check the machine to certify that it was functioning properly when the jackpot hit. If you hit one of the wide-area progressive machines such as MegaBucks, the slot company that operates the game comes out and verifies that machine before giving you a check.

When you hit a jackpot, you have the option of taking your winnings in cash or check. Usually, large amounts are paid by check. In the case of the MegaBucks or similar multi-million dollar jackpots, you receive a check for the partial amount, and then you have 90 days to decide if you want to be paid a lump sum or an annual annuity on the balance. If you select the lump sum option, you receive only a percentage of your actual winnings. For example, the full winnings of one multi-million slot jackpot is paid in 25 annual installments, or you can take a lump sum of 60 percent of the winnings.

IRS Withholding

All casino winnings are subject to federal taxes. However, the IRS only requires the casinos to report wins over $1,200 on slots and ​video poker machines or other games such as keno, lottery or horse racing. When you have a win equal to or greater than $1200, you are issued a W-2G form. This form lists your name, address and Social Security number. The casinos are not required to take out withholding tax on jackpots under $5,000 as long you supply your Social Security number. If you don’t provide your Social Security number, the casinos withhold 28 percent on small jackpots.

You can request a specific amount of withholding tax to be taken out of any jackpot you win. Some players like to do this to avoid a big tax payment in April when they file their income tax returns. The additional withholding may not be necessary if you keep a log book. The law allows you to deduct gambling losses up to the amount of your winnings. You can only do this if you have documentation of your losses. Keeping a diary or log book is the way to do this.

Filing Taxes Casino Winnings No Deposit

Proper Identification

Casinos can refuse to pay you until you produce proper identification—a photo ID such as a driver’s license, military ID or passport.

If you don’t produce an ID, you are photographed and the casino holds your winnings until you come back with proper ID. For this reason, you should always carry a valid form of identification with you when you visit the casino.

When the casino checks your identification, it also checks your age to make sure you are legally old enough to play. The minimum age for gambling varies from state to state, but under-age gamblers are not be paid if they hit a jackpot. This is the law in all jurisdictions, and it has been upheld in court.

Plan Ahead

Filing Taxes Casino Winnings Losses

Before you start playing your favorite slot machine you should have a plan for the day you hit a jackpot. Players become excited when they hit the big one, and this may affect the decisions you make about your winnings. It is helpful if you know ahead of time how much withholding you want taken out or whether you want a check for all or some of the amount.