All casino gambling winnings, including slot machine winnings, are subject to get taxed by the federal government. It doesn’t matter if it’s a five hundred dollar win from a game of craps or a one million dollar win from a poker tournament, by law, all gambling winnings should be reported on the winners’ federal income tax return. $600 or more in gambling winnings (except winnings from bingo, keno, slot machines and poker tournaments) and the payout is at least 300 times the amount of the wager Any other gambling winnings.

Jan 30 '18 at 17:09

Are Slot Machine Winnings Taxable In Pa

Tax Advice for Casino Players: W2-G Handpay Jackpots, Filing as a 'Pro' and More

The feeling of stress and anxiety that comes when filing taxes can be overwhelming for anyone, but especially for casino players that hit slot jackpots or enjoy other high stakes gaming.

Harrahs slot machine locator with bonus rounds. Everyone has a different opinion about how to file, and there are very few resources available that give gamblers peace of mind. That’s why I recently sat down with Ray Kondler of Kondler & Associates. Ray is a Certified Public Accountant based in Atlantic City and Las Vegas.

He’s also one of the top national experts on gambling taxes.

While Ray works closely with the World Series of Poker, he also serves slot and table players in all 50 states. In our fascinating conversation, Ray gave us the insider’s look at gambling taxes, keys for minimizing the chances of an audit, and tips for paying as little as possible… while staying within the bounds of the law, of course!

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Here are the highlights from our great conversation. (You can also watch or listen to the full episode below.)
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The First Thing Gamblers Should Know About Taxes

One of the most common questions new gamblers ask is, “When do I have to report my winnings?” The answer actually varies depending on what you play.

Casinos will issue W-2Gs for winnings greater than $1,200 from a slot machine or $5,000 from poker. The moment you hit the jackpot, a casino staff member will bring the W-2G to you at the machine to get a signature (although new technology is emerging in high limit slot areas that lets players electronically sign the W-2G so they can get back to playing right away). The casino sends a copy of all W-2Gs to the IRS.

(Table game players don't face the same level of scrutiny. Casinos don't issue W-2Gs for table games like craps and blackjack.)

Did you know that the IRS matches up the W-2Gs the casino sends with your tax return?

This is extremely important! If you fail to file those winnings on your tax return, in most cases, the IRS will send a notice asking you to amend your return.

Want to protect yourself from an audit? Download our FREE Casino Player's Logbook to start keeping better records of your gambling activity.

As Ray points out, this practice isn’t limited to land-based casinos. Cruise lines also issue W-2Gs, and US Citizens are required to pay tax on gambling income earned worldwide — not just in the US.

The bottom line is, if you receive a W-2G, don’t ignore it. The IRS sure won't..

Once gamblers know which winnings to report, the next question is usually, “How do I minimize my tax bill?”

Filing as a Professional Gambler

When Ray sits down with a client, one of the first decisions they make is whether the player should register as a professional gambler.

Most slot players wouldn't even think of filing as a professional. (To be honest, I didn't even know that was an option before speaking with Ray). For slot players, especially retirees or those with limited other income, filing as a professional gambler comes with a unique set of advantages.

In most states, a normal casino player (aka amateur gambler) can only write off casino losses up to their total winnings. So, for example, if you have $100,000 in W-2G winnings, but lost $150,000 during the year, you can only write off $100,000 of losses when filing taes.

***Note: some states (Connecticut, Illinois, Indiana, Massachusetts, Michigan, West Virginia, and Wisconsin) do not allow amateur gamblers to deduct gambling losses from their winnings. The only way around this is to file as a professional and deduct losses as an “expense of doing business” on a Schedule C.

On the other hand, a professional gambler can deduct other expenses associated with their casino play (it's a JOB after all - ha!). If they have $100,000 in W-2Gs, they can write off $100,000 in losses AND subscriptions to gambling resources, travel and meal expenses, home office expenses, and legal/professional fees. Professionals can then actually show a net loss on their Schedule C (Self-Employment) tax return and deduct it against their other income (like taxable Social Security income).

So who can qualify as a professional?

Taxable Slot Machine Winnings Money

It turns out, qualifying as a pro isn’t based on winnings. It’s actually based on how much time someone spends gambling. Someone who plays slots five or six hours per day and has no other job could most likely file as a professional. This is especially useful for gambling retirees!

When advising retired clients, Ray recommends filing as a professional as soon as their Social Security income is taxable (over $40,000). This allows any below-the-line gambling losses to reduce taxable income.

Filing as a professional makes sense for many casino players, but there also are a few downsides to be aware of.

First, filing as a professional increases your chances of being audited.

Another downside is if you file as a professional and win a significant amount, you’ll have to pay Social Security tax.

Depending on the amount of Social Security tax, it may be smarter to file as an amateur. This is something Ray and his team help their clients figure out. They’ll complete the tax returns both as a professional and as an amateur. Then they will see which filing status makes the most sense for the client for that particular year.

It’s also worth noting that filing as either a professional or amateur one year doesn’t lock you in to that status for following years. For example, let’s say you filed 2016 tax return as an amateur gambler. In 2017, you gambled the same amount of time, but due to an increase in winnings, it makes more sense to file as a professional. This is allowed by the IRS. You can decide which filing status is right for you on a year to year basis.

How to Protect Yourself From a Tax Audit

While casual and moderate gamblers have a relatively low chance of being audited, the prospect of being audited is stressful for anyone. Ray says the most important thing you can do to protect yourself is to keep good records.

It might be a pain in the neck, but everyone should keep clear, detailed records — especially if you’re filing as a professional.

Ray recommends using a dedicated credit/debit card to charge all gambling-related expenses. Then keep track of all gambling activity with a logbook.

Want to protect yourself from an audit? Download our FREE Casino Player's Logbook to start keeping better records of your gambling activity.

Most of Ray’s clients log their activity in a spreadsheet at the end of the week, but he has many clients that keep daily records. While there are several logging