Florida Gambling & Taxes

In a world of bottom-line statements, the unavoidable truth regarding gambling in Florida is that all gamblers’ 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.

As there are many different ways to legally gamble in the Sunshine State, from the lottery to racetracks to tribal casinos, questions about how to file taxes when you have winnings can arise. The potential launch of legal sportsbooks in the state could eventually add another option.

No matter how much you won, what forms of gaming you used to collect some winnings, or even if you don’t even actually live in Florida, all the information you need to understand this tax situation comes down to a few forms and the proper perspective.

Will gambling companies withhold part of my winnings for taxes?

The norm across the country for companies who offer gaming to customers is to withhold a quarter of qualifying winnings.

However, if casinos, racetracks, or any other operator lacks any of your identifying information like your Social Security number, they might hold up to 28%.

Laws on this matter vary from state to state. But the important thing to note here is that, even if this withholding does occur, you can’t just assume that was enough to take care of all your tax liability. It depends on your unique tax situation.

What is the IRS’ withholding rate for gambling winnings?

This is one of a few things in the federal tax code that hasn’t changed since 2017.

For qualifying gambling winnings of $5,000 or more, the rate is 24%. Understand that’s a cumulative amount for the entire tax year. The tax code includes the following forms of gaming:

  • Certain pari-mutuel pools
  • Jai alai
  • Lotteries
  • Sweepstakes
  • Wagering pools

Although other types of gambling may not be specifically mentioned in the federal tax code, that doesn’t mean they aren’t taxable. The reality is that every dollar you win while gambling, regardless of whether you actually make a profit, is taxable.

The IRS expects you to report the dollars as income on your tax returns each year and pay any amounts owed. As previously mentioned, however, that might already be taken care of. How do you know? You just need one form when you do your taxes for the year.

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 is, if your winnings cross certain thresholds:

  • 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) are more than $5,000
  • Except for winnings from bingo, keno, poker tournaments, and slots, your winnings are at least $600 and at least 300 times your wager (reduced by the wager)
  • For any reason, your winnings are subject to federal income tax, either backup or regular gambling withholding

Again, remember that those amounts are cumulative throughout the year. That means if you won $100 playing slots 12 times throughout a tax year, you’ve hit that $1,200 level.

What a W-2G form essentially does is tell both the IRS and you how much you won gambling from that specific company during the year and how much, if anything, the company withheld from your winnings for tax purposes.  After you have received all the W-2Gs you expect for a year, it’s time to put them to use.

How to report gambling winnings in Florida

If part of your winnings were withheld for taxes, all you might have to do here is simply transfer some numbers. That depends on how much taxable income you had from all sources during the entire year. Either way, there’s no benefit to trying to hide or underreport your gambling winnings.

If you received a W-2G form, the IRS is already aware of that activity. 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 wagered don’t figure into this situation whatsoever. Only winnings matter.

Whether you have to pay above and beyond the withholding or not, the first thing to do is that transfer of numbers. Gather every W-2G form you received for a tax year if you have multiple. If you only have one, then that obviously will be a quick process. The pertinent boxes for reporting are Box 1 and Box 4. The figures in them are what the IRS is interested in.

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. At this point, you’re done reporting your gambling activity for the year to the IRS.

What should I do if I don’t receive a W-2G?

If you know you have some gambling winnings from an entity and 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

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. So, 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. That is the amount of your gambling winnings for the same tax year. As an example, if you played the lottery several times throughout the year and spent a total of $500 on lottery tickets and winning $50 off those tickets over the course of the same year. Although you actually lost $450, you can only deduct $50 of that, as that is the amount you won.

However, 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.

What if I’m part of a group that wins a prize?

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 takes 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 5754 forms to tax returns. The gambling company will use the 5754 to get an appropriate W-2G to each member of the group. From there, each person is responsible for following through on their own returns.

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 have consulted 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.

Regardless of those plans, the IRS considers lottery winnings like any other form of gambling winnings. If your winnings are at least $601, you should get a W-2G from the lottery. The lottery will also probably withhold part of your winnings for tax purposes in that case as well.

What if I win while playing a multi-state lottery game?

As far as the IRS is concerned, there’s no difference between a Florida Lottery game and a multi-state lottery game. So, if you win a prize of $601 or more 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.

So, 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 this instance, you might have to file a non-resident return in that state. Check with a tax professional to determine whether this is necessary.

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 won 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 this taxable income. Don’t worry, you won’t have to guess how much to report on your taxes. The entity that grants the prize will give you a 1099 that shows the fair market value of your prize.

On your tax return, you would include that amount with any other 1099 income you have for the year.