“You Hit the Jackpot—Now What? The Truth About Gambling Winnings and Taxes”You won $10,000 at the casino.You cashed out $3,200 from a fantasy football league.You took home a car in a raffle.

Congratulations! But before you spend it all—know this:

The IRS considers all gambling winnings taxable income.

Yes—even that slot machine payout, poker tournament prize, or online betting win.

Let’s break down what you owe, what you can deduct, and how to avoid a nasty surprise come April.

🔍 Step 1: All Gambling Winnings Are Taxable
Per Pub 525, you must report all gambling winnings as “other income” on Schedule 1 (Form 1040), Line 8b, including:

Casino jackpots
Lottery prizes (cash or cars)
Poker tournament payouts
Fantasy sports winnings
Bingo, keno, horse racing, sports betting
💡 Fair Market Value (FMV) counts for non-cash prizes.
Example: A $30,000 car = $30,000 of taxable income.

💰 Step 2: When Is Tax Withheld?
The payer must withhold 24% federal tax if your winnings exceed:

$5,000 from lotteries, sweepstakes, or poker tournaments
300x your bet on other wagers (e.g., $10 bet → $3,000+ win)
📌 You’ll receive Form W-2G showing the amount won and tax withheld.

⚠️ Exception: Slot machines, bingo, and keno are not subject to withholding—but still fully taxable.

🎯 Step 3: Can You Deduct Your Losses?
Yes—but only if you itemize deductions on Schedule A.
And you can only deduct losses up to your winnings.

✅ Example:

Winnings: $12,000
Losses: $9,000
→ Deduct $9,000 on Schedule A
→ Report $12,000 as income
❌ No itemizing? You still owe tax on winnings—but get no offset for losses.

📝 Step 4: Keep Proof—Or Lose the Deduction
The IRS requires detailed records of wins and losses (IRC § 6001):

Diary or log with date, location, type of wager, amount won/lost
Supporting docs: tickets, statements, receipts, W-2Gs
💡 Tip: Use a notes app or spreadsheet—update it after every session.

🎲 Special Rule: Professional Gamblers
If gambling is your trade or business, you report income and expenses on Schedule C—not Schedule 1 + Schedule A.

But beware:

You’re subject to self-employment tax
The IRS scrutinizes “professional” claims closely (Pub 5774 audit standards)
💬 Final Advice from Uncle Joe
Winning feels like free money—but the IRS sees it as income.
Don’t ignore it. Don’t hide it. Just report it right.

Because the worst jackpot isn’t the one you lose—it’s the penalty you didn’t see coming.