When Casinos Withhold Tax
Federal casinos withhold tax on gambling winnings only in specific cases — only wins over $5,000 or certain backup withholding situations. The amount withheld is not usually the final tax owed.
When Withholding Is Required
Casinos are required to withhold tax from gambling winnings that meet specific thresholds. Gambling winnings of more than $5,000 from a sweepstakes, wagering pool, lottery, or any other wager that pays at least 300 times the amount bet are subject to federal income tax withholding at a flat 24%.
The Missing-TIN Case
Backup withholding applies to gambling winnings when the winner fails to furnish a correct taxpayer identification number, which may trigger withholding. It can apply when the gambling withholding does not apply, and the winnings meet or exceed the reporting threshold and, if applicable, at least 300 times the wager. Crucially, the IRS treats the total amount of such winnings as subject to withholding, not just the payments over the reporting threshold.
What Gets Reported
If a casino has withheld tax from your gambling winnings, you can expect to receive a Form W-2G. This form reports both the winnings and the amount of federal income tax that was withheld on those winnings. Casinos are required to furnish this form if the federal income tax was withheld from the pay-out.
Why the Withheld Amount Is Not the Final Tax. While 24% may seem like a substantial tax bite, the amount withheld from your jackpot is not necessarily your final tax bill for that gambling income. The IRS treats gambling winnings as other income and may require estimated payments or reconciliation on your annual tax return. The IRS says gambling winnings may require estimated tax payments.
The Casino-Side Mechanics. At the casino, the sources consulted largely confirm the mechanics of threshold-based withholding for specific winnings. The IRS says a payer may withhold 24% of gambling winnings from bingo, slot machines, and poker tournaments for federal income tax. There are no specific rules on when in the payout process this deduction happens.
In any case, the aim of tax withholding on gambling winnings is to ensure that the taxpayer pays an initial portion of the estimated tax liability, with the final liability determined through the annual tax-return process.
Written by the IGCS DeskExplanatory desk covering online casinos, sportsbooks and the money that moves through them. We do not rank operators and we do not take bets: every page here is meant to answer one question and then get out of the way.
