When Do You Have To Pay Taxes On Slot Machine
- Do You Have To Pay Taxes On Slot Machines
- When Do You Have To Pay Taxes On Slot Machine Wins
- When Do You Have To Pay Taxes On A Slot Machine Win
I went to my first horse race ever a few weeks ago when I snagged an awesome mystery shopping gig. The mystery shop reimbursable expenses even included three $10 bets that I placed on three different horse races. How neat! I have never placed a bet on anything before, and I was hopeful that I would win something. Unfortunately I walked away without winnings, but not without a wonderful evening paid for by a company. What if I had won? Would I owe tax on gambling winnings?
Do You Have to Pay Tax on Gambling Winnings?
Australian players do not need to pay taxes for their slot machine winnings, as the Australian law does not consider gambling to be anything more than a hobby. Gambling is not considered a profession in Australia. Therefore, the government does not tax those winnings, as they are considered the secondary source of income. By law, slot machines must pay out between 80 percent and 100 percent, over the life of the machine. Most slot machines pay out around 90 percent, with higher denominations paying out higher than lower denominations. A quarter slot machine generally pays out more than a nickel machine, a dollar machine more than a quarter machine, etc. The percentage of payout on a slot machine is determined by a computer chip within the machine itself.
If you’ve ever been successful at winning something such as the lottery, a bet on horses, or a slot machine at casinos, the money or non-cash prizes are considered gambling income by the Internal Revenue Service (IRS). And we all know that anything with “income” in its name is considered taxable. Also, the gambling industry is closely regulated by the government and earnings of above certain thresholds are automatically reported to the government. In other words, you can’t really get around paying the taxes owed on your gambling winnings. The IRS states:
Gambling winnings are fully taxable and must be reported on your tax return.
So let’s take a look at how the IRS handles gambling winnings.
What is Considered Gambling by the IRS?
Just so there is no confusion, the IRS considers the following to be gambling:
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- Bets on horse racing/dog racing
- Jai Alai (I had to look up what this is; turns out it is a game similar to racquetball) and other wagering transactions
- Sweepstakes
- Wagering pools
- Lotteries
- Bingo
- Keno
- Slot machines
- Poker tournaments
Two Different Withholdings
There are two different types of withholding that can occur before you are paid your gambling winnings. These are regular gambling withholding and backup withholding, and your winnings are subject to one or the other.
Regular gambling withholding is at the rate of 25%. This is used if the winnings minus the wager are more than $5,000 and are from sweepstakes, wagering pools, lotteries or other wagering transactions (winnings must be at least 300 times the amount wagered). Also, regular gambling withholding is figured on the total amount of gross proceeds (the amount of winnings minus the amount wagered).
Backup withholding is at a rate of 28% of gambling winnings, and can include winnings from bingo, keno, slot machines and poker tournaments. Backup withholding is done if the winner has not furnished a correct taxpayer identification number (TIN), 25% has not been withheld, and the winnings are at least $600, and at least 300 times the wager. The rule of 300 times the wager does not have to be met if the winnings are at least $1,200 from bingo/slot machines, $1,500 from keno, and more than $5,000 from a poker tournament.
Non-cash winnings must be assessed a fair market value (FMV). If the FMV exceeds $5,000 (after the deduction of the price of the wager) the winnings are subject to 25% regular gambling withholding.
Forms Involved
Form W2G (Certain Gambling Winnings) is typically the form you will receive from a casino or the place where you won in gambling. You must complete Form 5754 (Statement by Person(s) Receiving Gambling Winnings) if you receive gambling winnings either for someone else or as a member of a group of two or more people sharing the winnings, such as by sharing the same winning ticket in a lottery. The information you provide on the form enables the payer of the winnings to prepare Form W-2G for each winner to show the winnings taxable to each.
Can You Deduct Expenses and Losses?
When people win from gambling, they had to bet, wager, or buy into the transaction. Chances are good that they have been putting in money over an extended period of time before they see any “return”. Of course most people will never see a return from gambling. But this begs the question of whether or not the IRS allows a deduction for the money that it cost to win the particular wager they are being taxed on, as well as on all the previous “losses” leading up to the big win.
To deduct your losses, you must keep a log of wins and losses during the year in addition to receipts, statements or records showing the wins and losses. You cannot deduct more than the amount of the winnings, and deductions can only be made if you itemize your deductions rather than take the standard deduction.
Professional gamblers. For someone like poker players, people who are professional poker players may be allowed to deduct other business expenses for the tournaments in which they play. (Check this article out to see whether or not you can be classified as a business or if it is considered a hobby to the IRS). For more information, check out the IRS website.
Do You Have To Pay Taxes On Slot Machines
More on Gambling and Taxes
By Al Parker Sept. 1, 2018
It’s the dream of every slot player: Slide money into the machine, press the button, (or pull the handle if you’re an old school player), and watch the symbols line up.
Winner. Winner. Winner!
Suddenly you realize you’ve just won a big jackpot. You hit it really big. It could be a life-changing moment if the prize is hefty enough.
“About 12 years ago a group of ladies came in to play and brought a friend whose husband had passed away,” recalled Johnny Barrientoz, director of slots who oversees some 1,430 machines at both Turtle Creek Casino and Leelanau Sands Casino. “They just wanted to take their friend out to have some fun, take her mind off her troubles.”
It was the widow’s first-ever visit to a casino. She felt out of place, but was willing to try her hand at a slot machine. She sat down and slipped $20 into a progressive Wheel of Fortune machine. On her very first pull ever, she won the $330,000-plus jackpot.
“It changed her perspective,” recalled Barrientoz. “It just goes to show, it’s timing and luck.”
Kalkaska resident Jennifer Guggisberg was celebrating the July 4 holiday by playing a 10-cent Quick Hits game at Turtle Creek when she hit for $4,638.
“All of a sudden all of these Quick Hit symbols came up,” she said. “I didn’t realize what I won at first. Then I got excited. You’d think I won a million dollars!”
Guggisberg quickly made plans for a family trip to Florida next April.
Two days later, on a Friday night, she returned and won another $2,200. Then her fiancé went back two days after that and hit for $5,400 on another Quick Hit machine, right next to the one that originally paid off for Guggisberg.
On July 10, Jacquelyn Williams was at Turtle Creek with her mother and playing a Life of Luxury machine for the first time when her 60 cents resulted in a $6,358 jackpot.
“I had only been there 20 minutes or so,” said the Bay City resident. ”I picked a gem, and I didn’t know what was happening. The machine just kept adding up the money. It was just a very lucky moment.”
The win means Williams will be planning a spring trip to Italy to see her son who is stationed there in the U.S. Air Force.
And recently a Turtle Creek guest was playing a 100-Play Video Poker machine when he was dealt a Royal Flush. The payout for the 100 Royals was $100,000, according to Barrientoz.
But before you mentally start spending your next slot machine windfall, here are a few things you should know:
First, once you spin and win, no need to flag down an attendant. A casino employee will quickly find you. At Turtle Creek, a new automated system sends a signal to an iPod carried by each slot attendant, who will check the machine, making sure it’s working properly, and that your win wasn’t the result of a machine malfunction.
If it is a malfunction, you still get the money right? No. Most machines carry discrete labeling that says “Malfunctions void all pays,” which protects the casino.
The attendant will then verify your identification. You won’t get a penny unless you show a valid ID. But once you show your ID, you’ll get your hand filled with bills.
If your win is $1,200 or more, you’ll need to fill out a federal income tax form. Yes, the IRS gets a cut. You have to pay federal tax on all of your winnings and the casino will issue you a W-2G form, an IRS document specifically designed for certain gambling winnings.
If you’re a casino regular, you can deduct the money you spent while chasing that jackpot, provided, of course, that you kept records of your wins and losses.
You can have the tax bite taken out at that time or pay later. “About 20 percent of our big winners have the taxes taken out at the time,” said Barrientoz. “It’s at the discretion of the guest.”
At Turtle Creek, if the jackpot is more than $25,000, the casino will issue a check. And in certain situations, the casino will offer the winner a free room and a dinner while employees process the appropriate paperwork.
After all, if you have a free meal and all that freshly won cash, there’s a good chance you may keep playing. That’s what the casino is hoping. If you do decide to leave, most will happily have their security team to escort you to your car.
If you’re one of the very rare players who wins more than $1 million, you have options. Many casinos will offer either a cash payout or an annual fixed sum. You usually have 90 days to make your choice. For some large progressive jackpots, it can take hours. Sometimes it’s out of the casino’s hands, since some payouts — like the Megabucks in Nevada — are handled by game manufacturers. You could have to wait days or weeks for your money.
If you’re only won a few thousand dollars (still pretty good), you’ll get the money quicker. But don’t stress if it takes longer. The casino is not trying to get out of paying you. It’s a good time to grab a meal at a casino eatery, relax, and contemplate your good fortune.
After all, if your lucky slot machine has 64 stops on each reel. Your chances of hitting the biggest jackpot would be 1 in 262,144, and many machines have far more than 64 stops per reel.
THE COMPETITOR
Manton resident Kathy Duranso finished in first place in the 2017 Turtle Creek Casino TournEvent in October, winning $2,500 and a trip for two to Las Vegas to compete in the national tourney.
Duranso had never been on a plane before, let alone outside Michigan. She and her boyfriend Dan stayed at the elegant Wynn hotel-casino.
“I felt like I already won,” said Duranso, who met actors George Hamilton and Danny Trejo during the trip.
There were some 175 other players from 90 casinos taking part in the national event.
Playing in the tourney’s first session, Duranso did well, advancing to the second round. Cheered on by some Turtle Creek staff who flew out to see her, Duranso placed in the top 14 players, taking home $5,000 in cash, enough to pay off her house and buy winter coats and boots for her grandchildren.
REMEMBER
For every great win story, there are countless losses. So play only what you can afford to lose, and if you can’t help but play more, contact Gamblers Anonymous to find help near you: www.gamblersanonymous.org.