Income tax is withheld at a flat 25% rate from certain kinds of gambling winnings.
Gambling winnings of more than $5,000 from the following sources are subject to income tax withholding.
- Any sweepstakes; wagering pool, including payments made to winners of poker tournaments; or lottery.
- Any other wager if the proceeds are at least 300 times the amount of the bet.
It does not matter whether your winnings are paid in cash, in property, or as an annuity. Winnings not paid in cash are taken into account at their fair market value.
Gambling winnings from bingo, keno, and slot machines generally are not subject to income tax withholding. However, you may need to provide the payer with a social security number to avoid withholding. See Backup withholding on gambling winnings
on this page. If you receive gambling winnings not subject to withholding, you may need to pay estimated tax. See chapter 2
If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. See chapter 4
If a payer withholds income tax from your gambling winnings, you should receive a Form W-2G, Certain Gambling Winnings, showing the amount you won and the amount withheld.
Report the tax withheld on your 2010 Form 1040, along with all other federal income tax withheld, as shown on Forms W-2 and 1099.taxmap/pubs/p505-006.htm#en_us_publink10007300
If the payer asks, you must give the payer all the following information.
- Your name, address, and social security number.
- Whether you made identical wagers (explained below).
- Whether someone else is entitled to any part of the winnings subject to withholding. If so, you must complete Form 5754, Statement by Person(s) Receiving Gambling Winnings, and return it to the payer. The payer will use it to prepare a Form W-2G for each of the winners.
You may have to give the payer a statement of the amount of your winnings, if any, from identical wagers. If this statement is required, the payer will ask you for it. You provide this statement by signing Form W-2G or, if required, Form 5754.
Identical wagers include two bets placed in a pari-mutuel pool on one horse to win a particular race. However, the bets are not identical if one bet is "to win" and one bet is "to place." In addition, they are not identical if the bets were placed in different pari-mutuel pools. For example, a bet in a pool conducted by the racetrack and a bet in a separate pool conducted by an offtrack betting establishment in which the bets are not pooled with those placed at the track are not identical wagers. taxmap/pubs/p505-006.htm#en_us_publink10007302
If you have any kind of gambling winnings and do not give the payer your social security number, the payer may have to withhold income tax at a flat 28% rate. This rule also applies to winnings of at least $1,200 from bingo or slot machines or $1,500 from keno, and to certain other gambling winnings of at least $600.