Florida Gambling and Taxes
In a world of bottom-line statements, the unavoidable truth in Florida is that all gambling winnings are taxable.
The IRS considers any winnings an improvement to Floridians’ financial situation. The type of gaming or where it took place is irrelevant. Therefore gambling winnings are taxable income.
There are many different ways to gamble legally in the Sunshine State, from the lottery to racetracks to tribal casinos to card rooms. The potential launch of legal sportsbooks in the state could eventually add another option. Therefore, questions about how to file taxes whenever you do win can arise.
Note that while the IRS requires you pay taxes on gambling winnings when filing your federal income taxes, Florida has no state income tax so there’s no worry there.
When it comes to federal taxes, though, here is all you need to know about how to calculate and fulfill your tax obligation on gambling winnings.
Will gambling companies withhold part of my winnings for taxes?
When you win money gambling at Florida casinos, card rooms, racetracks or elsewhere, or if you win while playing the Florida Lottery, you’ll find that sometimes money will be withheld from your winnings before you receive them. This typically only happens if you win $5,000 or more, in which case you’ll discover 24% of your winnings withheld for federal taxes.
Until recently, if you didn’t have a Social Security Number or Individual Taxpayer Identification Number, the operator would withhold 28% from your winnings (if $5,000 or more). However that rule has been changed and now all winners have the same 24% withheld. However if you are not a US citizen and win $5,000 or more while gambling in Florida (or anywhere in the US), the operator will withhold 30% of your winnings for federal taxes.
There are some exceptions to this rule as well. For instance, if you don’t have a Social Security Number, the Florida Lottery will withhold 24% for federal income tax from any prize of $600 or more.
When you win less than $5,000, you’ll usually receive the full amount of your winnings at the time you collect. However, that doesn’t mean you don’t have to pay taxes on those winnings — you do.
Also, keep in mind that just because 24% of your $5,000-plus score was withheld, you may well need to pay more tax than that when you file your return.
Remember, gambling winnings are counted as regular income, and so they will necessarily increase your overall income for the year. The amount of federal income tax someone owes depends on their total income. Those in the lowest income bracket requiring tax to be paid only pay 10% federal income tax, while the IRS requires the highest earners to pay 37%. That means if you are in one of the higher brackets, you may ultimately have to pay more than 24% federal income tax on your winnings — it depends on your overall income.
IRS Form W-2G is important
All the information you need to determine how much to report to the IRS and whether you owe any taxes on your winnings is conveniently listed for you on Form W-2G.
The best part of this form is that other people do the work for you here. You should get a W-2G form from each gambling company you won money from over the course of the year. That said, the operators will only send you a Form W-2G if your winnings exceed certain thresholds. You should receive a form when:
- Your winnings (not reduced by the wager) are at least $1,200 from a bingo game or slot machine
- Your winnings (reduced by the wager) are at least $1,500 from a keno game
- The part of poker tournament pool(s) you claimed (reduced by the buy-in or wager) is more than $5,000
- Your winnings (reduced by the wager) are at least $600 and at least 300 times your bet (aside from bingo, keno, poker tournaments, and slots)
When you receive a Form W-2G, the IRS also gets a report on your win from the gambling company. The Florida Lottery (for example) automatically reports all wins of $600 or more to the IRS. Thus whenever you get a Form W-2G, you can be assured the IRS knows about your gambling win and whether or not any taxes have already been withheld.
That said, you still owe taxes on all your gambling winnings, even those that didn’t elicit a Form W-2G. Indeed, sometimes operators fail to send out a Form W-2G when they should have. Either way, you still need to fulfill your tax obligation.
How to report gambling winnings in Florida
Don’t try to avoid paying taxes on gambling winnings. There is no benefit to trying to hide or underreport your gambling winnings. As noted, if you received a W-2G form, the IRS is already aware of that activity. But don’t make the mistake of thinking you only have to pay taxes on winnings that have already been reported to the IRS. Your tax obligation covers all gambling winnings.
Fines and interest for underreporting can quickly add up to and surpass any amount you might save by underreporting. As a matter of fact, some taxpayers cheat themselves out of refund dollars by underreporting.
A common trap that many gamblers fall into is assuming they only have to report any profit they made during the year. Many gamblers will subtract the amounts wagered from their winnings and only report the difference. That is incorrect and an example of underreporting. The IRS taxes every dollar you made in winnings, regardless of whether they actually represent a profit. The amounts you have wagered don’t figure into this situation whatsoever. Only winnings matter.
How to use Form W-2G
Whether you have to pay above and beyond what has been already withheld or not, the first thing to do is transfer some numbers. Gather every W-2G form you received for the tax year. The pertinent boxes for reporting are Box 1 and Box 4. Those are the figures that matter to the IRS.
The numbers in Box 1 are what you won from that gambling company over the course of the year. If you have more than one W-2G, add up all Box 1 figures. Once you have that sum, put that figure on an IRS Form 1040, Schedule 1 as “Other Income” on Line 8.
You might have additional income that qualifies for this designation. If that’s the case, simply add the total of all Box 1 figures to the income from those sources. The total from “Other Income” on your Schedule 1 also goes into Line 8 of your actual return, IRS Form 1040.
Box 4 on your W-2G form(s) shows any amounts withheld from your winnings for tax purposes. If you have more than one W-2G, you should again add up all these figures. That total goes into Line 17, “Federal Income Tax Withheld” on your Schedule 1. Don’t file your 1040 without Schedule 1.
You should not attach any of your W-2G forms to your tax return. However, the IRS does recommend you keep them for your records for at least five years.
What should I do if I don’t receive a W-2G?
If you know you have some gambling winnings you haven’t yet received a W-2G from that company, the first thing to do is contact that entity. They might have your address information wrong, for example. The gaming companies are well aware of their responsibility to get this form to you. If it’s early February and you’re still waiting, it’s time to take action.
If that doesn’t work, it doesn’t alleviate your responsibility to report and perhaps pay taxes due on your gambling winnings. Even if you never get any W-2G forms, your winnings are still taxable income.
How do you determine those amounts without a W-2G? Some places to look for this information can include:
- Bank or credit card statements
- Gambling companies’ loyalty/rewards program statements
- Receipts for wagers
- Voided checks
Just like with every other element of your tax return, it’s your responsibility to track down and accurately report your gambling winnings. If you gamble frequently, you probably should develop some sort of system such as keeping a running spreadsheet and/or a folder full of receipts and notes helping you chronicle each time you win.
There is no state income tax on gambling winnings in Florida
As noted above, Florida has no state income tax, which means you don’t have to pay state income tax for your gambling winnings.
That’s good news for Floridians, since some states require very high state income tax that (in some cases) even exceeds 10%, depending on the person’s income.
Can I deduct anything related to gambling?
The simple answer to this question is yes, you can deduct your gambling losses for the year. However, in most cases, you’d actually be better off not doing this.
There are two reasons behind this. First, to deduct gambling losses, you have to itemize your deductions. That means you forfeit the standard deduction. Therefore, if your itemized deductions aren’t at least equal to whatever the standard deduction for your tax bracket is, then itemizing isn’t a win for you.
Secondly, there’s a cap on how much you can deduct when it comes to gambling losses. Namely, you can’t deduct more than you have won (in the same tax year). As an example, let’s say you played the lottery several times throughout the year and spent a total of $500 on lottery tickets and won $50 total. Although you actually lost $450, you can only deduct $50 of that as gambling losses, as that is the amount you won.
In any case, if you deem it wise to go ahead with deducting losses, the process is simple.
Schedule A of the IRS Form 1040 is the necessary document. Put the total of the gambling losses you want to claim on Line 28. Two more important things to note here are that you need to keep detailed records of your activity and that you can’t deduct any related expenses. The money you spent on beverages or food or a hotel stay while you played is not deductible, only the amounts you wagered and lost. Nor can you deduct the cost of traveling to a real money poker tournament. Only expenses directly related to gambling can be deducted.
What if I score a big prize playing the Florida Lottery?
Congratulations on your windfall, for starters. If you’ve won a prize of six figures or more playing a Florida Lottery game, the first thing to do is secure the ticket. However, you should wait to sign it and claim your prize until you consult with an attorney and a financial adviser.
They might be able to come up with strategies that can not only protect your identity but also limit your tax liability not only immediately but into the future as well.
The IRS considers lottery winnings like any other form of gambling winnings. As mentioned before, if you win more than $600, the lottery will report your win to the IRS and also send you a Form W-2G. And as we’ve also covered, for wins of $5,000 or more, the Florida Lottery will in most cases withhold 24% of your winnings for federal income tax.
In other words, when it comes to paying federal income tax, winning money from the Florida Lottery should be handled just as you’d handle any other gambling winnings.
How to handle gambling winnings from multi-jurisdiction lottery games
As far as the IRS is concerned, there’s no difference between a Florida Lottery game and a multi-jurisdiction lottery game. If you win while playing Mega Millions or Powerball, you have to pay taxes on that just like if you won the same prize playing a game that is only offered in Florida.
At the same time, how much is withheld depends on where you bought the ticket. Withholding requirements are determined by which state you bought the ticket in, not which state you live in.
That means if you live in Florida but play Powerball in Georgia and win a prize on that ticket, the Georgia Lottery will withhold taxes from your prize according to Georgia law, even though you live in Florida. In that case, you might also have to file a non-resident state tax return in that state. Check with a tax professional to determine whether this is necessary.
What if I am part of a group that wins the lottery?
This continues to be a common occurrence around the country, especially in terms of playing the lottery.
That’s why the IRS has a form designed specifically for this situation. It’s Form 5754 and requires some action on your part. It’s really not that difficult, though. As a group, designate one person to handle this job. That person should collect all the identifying information from each group member. Once the form is complete, make a copy for each member.
Then, submit the original to the company granting the prize. Do not attach any Form 5754 forms to tax returns. The gambling company will use Form 5754 to get an appropriate W-2G to each member of the group. From there, each person is responsible for following through on his or her own returns.
Resources for taxpayers in Florida
Tax professionals are widely available in Florida and can handle your specific situation in great detail.
If you would like general guidance, however, the IRS does have taxpayer assistance offices throughout the country. If you do contact one of the IRS offices, have all your documents ready to expedite the process.
What if I win a prize that isn’t cash?
It isn’t uncommon at all for casinos and lotteries to grant prizes that are items instead of cash. Examples include boats, cars and trips.
Perhaps to people’s chagrin, the IRS considers non-cash gambling winnings taxable income. Don’t worry, you won’t have to guess how much to report on your taxes. The entity that grants the prize should give you a Form 1099-MISC that shows the fair market value of your prize.
On your tax return, you would include that amount with any other Form 1099-MISC income you have for the year.