So you've managed to come out ahead while gambling in New York. But before you spend your loot on a big ticket luxury item like a couples getaway to Niagara Falls or a Yankee Stadium hot dog, make sure you're square with the government agencies that are going to come looking for their cut.
We'll help you figure out how likely it is that you'll owe taxes on your winnings, how much tax you could owe, and why you're going to want to keep detailed records of your gambling winnings and losses. These are general guidelines only. For your own good, please consult a tax professional for further guidance if you have any questions about the New York gambling tax structure.
First things first, gambling winnings are taxable income. You're expected to report any winnings on your federal income tax return as well as any state tax paperwork. Our gambling tax calculator can give you an idea of what you're going to be on the hook for based on the standard deduction.
The short answer is "Yes", and the long answer is "Of course gambling winnings are taxable, why do you think the state decided to regulate gambling in the first place?" Whether you hit the jackpot on a scratch ticket or won a parlay on an online sports betting app, gambling income is taxable. If you hit a certain threshold on your winnings, the operator that runs the casino or sportsbook will fill out a tax form called the W2-G, which will detail your gambling activity including how much you won and how much money was withheld.
Did you sign up with a new online gambling operator and get a promotional bonus with some spins on the slot machines or credit for bonus bets on a sportsbook? You read the terms and conditions first, right? So the advertised value of the credits on the promotion is not considered taxable. However, anything you win and can withdraw that you get from the promotions is considered taxable. So if you claim $250 in bonus bets from a sportsbook, those aren't taxable. But if you play those bet credits, come out ahead and withdraw $175 in cash winnings, those are taxable. So make sure you make a note of any winnings coming from gambling promotions when you keep your records.
What are the Gambling Winnings Tax Rates in New York
Let's start with the easy part. Federal taxes on gambling winnings work out to 24%. From there, New York State will tax you at a rate in line with your taxable income. For New York gamblers, it breaks down like this:
When you hit certain minimum thresholds, the IRS is notified. The online sports betting or casino operator fills out the W-2G Form for your records and passes this information to the federal government. Here are those thresholds.
You'll also assume fair market value on non-cash prizes, like a car or something else you'd win on "The Price is Right." And if you have winnings in another state, you'll either need to fill out a non-resident return or file those winnings on your 1040 as "other income."
The W-2G should come automatically if you hit certain thresholds. But you should be keeping accurate gambling records in case you don't hit those thresholds. You can get records from online gambling companies without much trouble, but even a small notebook with your wagering activity - dates and amounts wagered and wins or losses - can help you. Keep your spent wagering tickets.
You can deduct gambling losses on both the federal and state level if you itemize. But if you take the standard deduction, you cannot. It's important to keep in mind that only the gambling losses themselves can be deducted - if you spend a couple of nights at a casino resort and lose at the tables, you can't deduct the cost of the hotel or meals, for instance. And you can't deduct more money than you won. For example, if you win $2,000 and lose $4,000, you're only allowed to deduct $2,000. Finally, be prepared to back up your claims with W-2G forms, gambling receipts, canceled checks, bank records and credit card statements. Again, keeping accurate records will keep you out of hot water.
New York Lottery winnings are also taxable income, subject to federal and state taxes, as well as local ones if you live in one of the five boroughs. With winnings over $5,000, the federal and state governments take it off the top before you even see it. The feds get their 24% and Albany will tax at the highest rate they can, which is 8.82%. And like any other winnings, clearing $600 means a W-2G will come from the lottery operator. But the New York State Lottery won't withhold or report gambling winnings on a prize under $600.
If you pool with the gang at the office and you all hit the big jackpot, here's hoping you like paperwork. Someone has to take the bull by the horns and fill out Form 5754, which will include the name, address and prize information for each player. That form goes to the lottery commission. Everyone on the list then gets a W-2G like any other winnings.
Everything noted above about winning the New York State lottery applies to a multi-state lottery like Powerball or Mega Millions. So the state taxes hit you at the 8.82% rate and the federal taxes at 24% first. Then you can get your piece. Whether you choose to receive your winnings as a lump sum or an annuity does not alter what you will owe.
That's your personal decision, and we're not your parents. But keep in mind that, if you got a W-2G, the IRS knows about it, so you won't be able to keep that from them. So it's probably best to come clean about your tax liability.
Otherwise, you may be looking at interest on what was unpaid and penalties. If you didn't win enough to get a W-2G, you can either report the money you won or live with the consequences of not doing that if you get caught.
Brian Dermody's attention to detail separates him from the rest when it comes to reviewing the top sports betting apps and casino sites in New York. Brian knows exactly what to look for when evaluating which sportsbook or casino app should be considered among the top available online and is trusted source when evaluating where to bet.