When you win a bet, you might feel like you’ve struck gold. But that winning feeling can quickly turn to dust in your mouth as you realize that taxes are coming your way.
In the case of a wager placed at a land-based sports book or casino, the Internal Revenue Service (IRS) requires you to pay tax on your winnings. The amount of tax you’ll have to pay will depend on how much you win, the rate at which you bet, and whether you’re a high roller or a bookmaker. Here’s how much of a betting win is taxed:
How Much Is The IRS Requiring From Me?
Let’s first look at how much the IRS is requiring from you. In the case of a casino bet, you’ll have to pay tax on winnings of $600 or more. But keep in mind that the IRS limits the amount of winnings that can be tax-free to $2,500 per year ($1,000 per month). So if you’re going over this amount, you’ll have to pay tax on the entirety of your winnings.
In the case of a wager at a land-based sports book, the amount of tax you have to pay will depend on the rate at which you bet. If you bet at one of the cheaper rates, you’ll have to pay only a small amount of tax. On the other hand, if you’re betting at the higher rates, you might have to pay a maximum of 40% in federal income tax.
What Are My Options?
Let’s now examine your options to reduce your tax burden. If you want to keep most of your winnings without paying tax, you can use one of the following methods:
- Reduce your bets. A $100 bet on the NFL will only cost you $50 after tax ($100 * 0.6). Going to the $200 bet level will cost you $120 after tax ($200 * 0.6) to make the same $100 profit.
- Play at an offshore casino. Most offshore casinos offer rewards programs where you can earn free chips and cash back matches. Plus, many casinos don’t have the same restrictions as land-based casinos so the odds are generally better. Tax law allows you to keep more of your earnings.
- Play at a brick-and-mortar casino. These are generally less expensive than offshore casinos and there’s no need to travel to another country to play. However, brick-and-mortar casinos don’t offer the best overall experience so you might want to avoid them if you can.
- Play in a state lottery where tax on winnings is not required. Not all lotteries are created equal though. Some states have very high taxes while others don’t. Check with the state lottery commission to see what their rates are like.
Where Can I Find More Information?
To find more information about how much tax you need to pay on your casino wins, simply type “federal income tax on casino wins” into your favorite search engine and you’ll be presented with a whole host of websites full of valuable information. Another great place to find relevant information is the IRS website.