If you’re new to gambling, you may be surprised to learn that no matter the size of the winnings, whether cash or noncash, they must be reported to the IRS. This also goes for sports betting; it makes no difference if the money comes from lotteries, casinos or horse races, you are still legally obligated to report your winnings.
Related: This Is the One Type of Debt That ‘Terrifies’ Dave Ramsey
Read: 6 Unusual Ways To Make Extra Money (That Actually Work)
There are minimum thresholds for the different gambling types. If you’ve won in your fantasy football league, $600 or above must be reported. For poker tournaments, it’s anything over $5,000. Bingo or slot machines are $1,200, and Keno is $1,500.
Gambling winnings are considered taxable income. Should you win, those paying you are required to issue you a Form W2-G titled Certain Gambling Winnings — similar to Form 1099, it is a record of your winnings. Most states have income taxes, meaning there’s a good chance the winnings are subject to taxes at the federal and state levels. Depending on your tax bracket, the rate varies from 10% to 37%. There are two withholdings, regular and backup. If the wins are subject to regular withholding, they will not be subject to backup withholding.
If your winnings are $5,000 or greater, the gambling entity can withhold up to 24% for federal taxes, which will be indicated on Box 4 of the W-2G. When completing your own tax return, you report your winnings on Form 1040, Schedule 1; you’ll report your losses on Schedule A. Professional gamblers can file a Schedule C for the self-employed.
Assuming you’ve itemized your deductions and maintained an accurate record of your winnings and losses, you can deduct losses from gambling — though only those directly related to wagers. You cannot deduct more than your winnings. Netting transactions, or grouping your bets together, is not allowed, as each wagering transaction has to be reported separately. If you claimed the standard deduction rather than itemizing, then you cannot deduct your losses.
Learn: Top 7 Countries with Zero Income Tax
In addition to the record of your winnings and losses, you should include in your log the date and type of gambling, and the people with whom you gambled. Because your losses may not be reported by the gambling entity, you should hold onto wagering tickets, canceled checks and receipts to validate your deductions.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: Taxes 2024: Use Online Betting Sites Like FanDuel? Here’s How to File for Gambling Winnings