Gambling Income

What Is Gambling Income?

Gambling income is any money that is generated from games of chance or wagers on events with uncertain outcomes. This income is fully taxable and must be reported on an individual’s federal tax return.

Key Takeaways

  • Gambling income is any money that is generated from games of chance or wagers on events with uncertain outcomes.
  • Gambling always involves a negative expected return—the house always has the advantage. 
  • This income is fully taxable and must be reported to the Internal Revenue Service (IRS).
  • The tax paid on gains is not progressive: U.S. resident gambling income is taxed at a flat rate of 24%, regardless of the amount won.

How Gambling Income Works

Gambling income includes any money earned from gambling, whether it be winnings from casinos, lotteries, raffles, horse and dog races, bingo, keno, betting pools or sweepstakes. The fair market value of non-cash prizes such as cars or holidays is also categorized as gambling income.

In certain cases, gambling establishments may be required to withhold 24% of gains for federal income tax, reporting this on a W-2G form that is given to the winner and sent to the Internal Revenue Service (IRS). If the lucky gambler does not receive a W-2G form from the payer, they must still report all gambling income to the IRS.

Casinos also issue a W-2G form when withholding is not required for the following type of winnings: $1,200 or more from slot machines or bingo, $1,500 or more from keno games, $5,000 or more from poker tournaments.

The full amount of income earned from gambling less the cost of the bet must be included on a person’s federal tax return. According to the IRS, taxpayers who aren't professional gamblers must report all gambling income not included on a W-2G as “other income” on Form 1040, the standard IRS document that individual taxpayers use to file their annual income tax returns. Shared gambling income, winnings divided by two or more people, should also be reported to the IRS.

Gambling Income vs. Gambling Losses 

Money lost on gambling can also be reported on a federal tax return. There are some limitations, though: Gambling losses in excess of what is won may not be claimed as a tax write-off.

In other words, if a gambler spent $10,000 to win $4,000, they would be unable to deduct the $10,000 expense or the $6,000 overall loss. Tax deductions can only be made on the winning sum, in this case $4,000.

Non-residents of the United States and Canada are unable to deduct gambling losses, according to the IRS.

If you or someone you know has a gambling problem, call the National Problem Gambling Helpline at 1-800-522-4700, or visit to chat with a helpline specialist.

Advantages of Gambling Income

Another potential advantage for gamblers is that income earned is not taxable at progressive rates, unlike regular income taxes. Gambling winners are always taxed at 24%, previously 25%, regardless of whether an individual won $1,500 on horse racing or $1 million at a poker table.

Non-U.S. residents, meanwhile, are generally taxed at a flat rate of 30% on their gambling income.

Special Considerations

Professional Gamblers

Professional gamblers, individuals that gamble on a regular basis, are treated differently. All of their proceeds are usually considered regular earned income and are therefore taxed at normal income tax rates.

Professional gamblers report their gambling income as self-employed income, which is subject to federal income tax, self-employment tax, and state income tax.

In 2018, the Supreme Court gave U.S. states permission to legalize sports betting if they wish to do so. It is still fully illegal in 12 states, including Georgia, Minnesota, and Texas. In three other states, there is some form of pending legislation.

Income Tax Withholding

Gambling establishments are required to withhold 24% of winnings and report them to the IRS when an individual surpasses certain thresholds—defined as $5,000 or more from sweepstakes, wagering pools, lotteries, or other wagering transactions, as well as when winnings exceeding 300 times the amount wagered.

Interestingly, casinos are not required to withhold taxes or issue a W-2G to players who win large sums at certain table games, such as blackjack, craps, and roulette.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Internal Revenue Service. "Topic No. 419 Gambling Income and Losses."

  2. Internal Revenue Service. "Instructions for Forms W-2G and 5754," Page 1.

  3. American Psychiatric Association. "What is Gambling Disorder?"

  4. Internal Revenue Service. "Instructions for Forms W-2G and 5754," Page 2.

  5. Internal Revenue Service. "ITG FAQ #5."

  6. American Gaming Association. "Interactive Map: Sports Betting in the U.S."

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.